America Is Self-Destructing: Wealth, Greed, and Ideology Trump Common Cause and Social Justice 9781481760874, 9781481760867, 9781481760850, 2013910425

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AMERICA IS SELF-DESTRUCTING: Wealth, Greed, and Ideology Trump Social Justice and the Common Good

US Rankings Among the Twenty Wealthiest Nations First in adult obesity Last in life expectancy Last in infant deaths per 1,000 live births Highest index of health and social problems Highest income inequality Smallest percentage of GDP in paid taxes Largest budget deficit as a percentage of GDP Lowest gross spending as a percentage of GDP Lowest spending for foreign aid as a percentage of GDP Second largest user of illegal drugs Highest homicides per million people First in number of prisoners per 100,000 population Second lowest UNICEF index of child well-being Fourth worst math and literacy scores by fifteen-year-olds Highest births per 1000 women aged fifteen to nineteen years THOMAS P. WALLACE

AuthorHouse™ 1663 Liberty Drive Bloomington, IN 47403 www.authorhouse.com Phone: 1-800-839-8640 © 2013 by Thomas P. Wallace. All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author. Published by AuthorHouse 06/07/2013 ISBN: 978-1-4817-6087-4 (sc)

ISBN: 978-1-4817-6086-7 (hc) ISBN: 978-1-4817-6085-0 (e) Library of Congress Control Number: 2013910425 Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only. Certain stock imagery © Thinkstock. Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them. Contents Preface : Disappearance of American Exceptionalism The Narrative: America Is Self-Destructing •   Evolutionary Patterns of Social Orders and Human Behavior •   Unequal, Inequitable, and Shameless Distribution of National Wealth •   Loss of Middle Class Purchasing Power and a Stagnant Economy •   Lessons Not Learned from History: Wise Investments of National Wealth •   Trickle-Up or Trickle-Down Economics? •   Dwindling Professional Ethics and Integrity •   Missing in Action: Social Cohesion, the Work Ethic, and Altruism •   America’s Self-Destructive Journey: One Chapter of Western Civilization •   Truth as Defined by the Prevailing Cultural Mentality •   Polarization of American Politics and Human Values Chapter I . America’s Corrupt, Dysfunctional Society: Loss of Cultural Values, Ethics, and Integrity •   America’s Post-1970s Theme: Greed Is Good •   Shifting Cultural Values and the Pursuit of Wealth •   Irrational Priorities and Failed Governance •   US Health Care: Partisan Politics, Bad Economics, and Anti-Altruistic Values

•   Health Care’s “Outrageous Pricing and Egregious Profits” •   Environmental Policy in an Era of Excessive Greed •   Big Money Financing Politics: A Gift Economy of Influence II . Political and Economic Exploitation of the Middle Class: Demeaning the Principles of Social Justice and the Public Good •   Political Economics and Philosophy of New Republicanism: Anti-Altruism •   Excessive Income Inequality: Statutory vs. Effective Tax Rates •   Creative Tax Schemes and Loopholes •   Money, Privilege, and the Power of Politics •   Knowledge Deposed by “Infotainment” and Anti-Intellectualism •   The Politics of Obstructionism •   American Democracy on the Ropes III . America’s Socio-Economic Stagnation: Debilitating Complexity and Misuse of National Wealth •   Struggling with the Forces of Cultural Complexity •   Complexity and Lack of Resources: Contributors to Economic Stagnation •   Realities and Costs of Creeping Societal Complexity •   The Price of Civilization and Achieving the Public Good •   Resource Challenges and Political Liabilities •   Great Deformations of a Crippled National Economy •   Excessive Wealth Inequality: What is Wrong With Public Policy? IV . Demise of the Middle Class Economy: Conflicting Economic Theories and Political Agendas •   Middle Class Journey: Great Depression to Great Recession and Beyond •   Decline of the Middle Class and Corporate Citizenship •   Degradation of the US Wage, Salary, and Benefit Structure •   Poverty in America “There is hay in the barn but we’re not feeding the horses.” •(k) Retirement Plans: “This Monster Is Out of Control” •   Failed Public Education

•   Federal Taxes Too High? But, Relative to What? •   The Pathway to Self-Destruction V . Equitably Sharing Productivity within a Capitalist Democracy: Fundamental to Common Cause, Social Justice, and Economic Growth •   Fluctuations of Cultural Values and Income Inequality •   America’s Two Gilded Ages and The Global Economy •   The Fallacy of Self-Correcting Free Markets •   Individualism: Rights and Freedoms vs. Responsibilities to Social Justice •   Inequality and Social Cohesion, Trust, and Status VI . Narcissistic Individualism and Darwinian Economics: The Role of Social Capital and Human Behavior •   Uncoupling and Disengaging from Community Involvement •   Declining Religious, Social, and Professional Involvement •   Mysterious Social Disengagement: Pursuit of the Good Life •   Human Nature, Values, and Behavior: Variables of Social Change •   Values and Morality Affecting Economic Behavior •   Individual Motivations, Aspirations, and Responsibilities •   Darwinian Economics •   The Influence of Spiritual Expectations on Economic Advancement VII . Post-1980s New Republicanism: The Culture of the Old South Collides with the Rights and Freedom Revolution •   The South’s Great White Switch: Culture Solidarity and Civil Rights •   Post-1950s Reorientation of Southern Politics •   Foundations of New Post-1980s Republicanism •   Newt Gingrich: Architect and Catalyst for a New Republican Culture •   Shifting Voter Values and Priorities •   The Political Partisan Divide •   Summary of Major Pew National Findings: Partisan Polarization •   New Republicanism and America’s Human Rights Revolution

•   The Rights Revolution Wins Big in 2012 Elections VIII . Big Money’s Grand Scheme and the Great Recession: Seizing Economic and Political Power (1970s-present) •   Origins and Mechanisms of Big Money’s Grand Scheme •   Consolidation and Solidarity via the Influence of Wealth •   Washington’s Post-1970s Political Culture •   Dismissing the Bretton-Woods Agreement and Glass-Steagall Legislation •   Post-Glass-Steagall Legislation Era (2000-2008) •   Goldman Sachs and the “Big Short” •   The Role of Credit Rating Agencies •   Aftermath of the Great Recession IX . Keynesian Economics to the Rescue… Again! From Roosevelt to Obama •   Rebounding from the Great Depression •   Post-1970s Abandonment of Keynesian Economics •   The Return to Keynesian Economics: The Bush-Obama Era •   Bush and Obama Address the Nation’s Financial and Economic Crisis X . Shifting Philosophical Currents of Thought: Self-Interest Defines Truth and Knowledge •   The Politics of Global Warming •   Shifting Human Values: Fabricating Truth and Altering Political Culture •   Formulation of Political Thought, Judgment, and Choice •   Identifying Variables of Truth: Relationships to Cultural Dynamics •   Defining Truth and Wisdom as Influenced by Adopted Values •   Western Civilization’s Six Philosophical Currents of Thought •   Cultural Roots of American Society’s Philosophical Basis of Truth XI . Comprehending America’s Cultural Dysfunction: The Science of Complex Systems and Chaos Theory •   The Nature and Complexity of Societal Functional Systems •   The Elements and Science of Complex Systems

•   The Origin and Mismanagement of Human Complex Systems •   The Great Recession: Mild Randomness of Economics Becomes Chaos Notes Athens, Sixth Century BC At the base of this democracy and this culture lies the production and distribution of wealth. Everywhere this is the foundation   .   .   .   . Supporting all society is the peasant, the poorest and most necessary of men. But [man] observes that the goddess of liberty is no friend to the goddess of equality, and that under the free laws of Athens the strong grow stronger, the rich richer, while the poor remain poor. Individualism stimulates the able, and degrades the simple; it creates wealth magnificently, and concentrates it dangerously. In Athens, as in other states, cleverness gets all that it can, and mediocrity gets the rest. The landowner profits from the rising value of his land; the merchant does his best, despite a hundred laws, to secure corners and monopolies; the speculator reaps, through the high rate of interest on loans, the lion share of the proceeds of industry and trade. Demagogues arise who point out to the poor the inequality of human possessions, and conceal from them the inequality of human ability; the poor man, face to face with wealth, becomes conscious of his poverty, broods over his unrewarded merits, and dreams of perfect states. Bitterer than the war of Greece with Persia, or of Athens with Sparta, is, in all the Greek states, the war of class with class   .   .   .   . The essential cause of the Roman conquest of Greece was the disintegration of Greek civilization from within. No great nation is ever conquered until it has destroyed itself. —Will Durant, The Life of Greece Preface Disappearance of American Exceptionalism The United States reached a pinnacle of exceptionalism during the period from World War II through the mid-1970s. America came to the aid of the free world and, after the war, led a restructuring of economic and financial institutions and revitalization of the world economy. America exhibited exceptionally broad-based industrial and human capabilities during the war and high moral values and wise economic policies afterward; in turn, the postwar global economy was exceptionally profitable for the United States.

Additionally, historic economic gains of the period from post-WWII through the 1970s brought unprecedented economic prosperity to the United States, which was equitably shared among all income segments and significantly improved the average well-being of the population. Unfortunately, this era of preeminent global exceptionalism has been gradually squandered since the 1970s, as wealth, greed, and ideology have gradually suffocated attempts to promote human rights, social justice, and the common good. The robber barons re-emerged, and America underwent a transition to a second Gilded Age, which brought forth the Great Recession, a rerun of the Great Depression. Clearly, American capitalism remains exceptional by virtue of its spirit of innovation, entrepreneurship, global economic achievements, and creation of abundant wealth. However, its current international ranking among the twenty richest nations of the world in providing for the broad-based wellbeing for its citizens is dismal, discouraging, and immoral. Political and corporate leaders continually preach about America’s exceptionalism, but apparently their criteria, as members of the Big Money class and as political power brokers, differ substantially from those of the poor and middle class. As the potential for America’s greatness continues to wither, its performance since the 1980s, as experienced by average citizens, does not measure up to greatness, much less exceptionalism. Consider, from a middle class prospective, current international data from the Organization for Economic Cooperation and Development (OECD), which rank US obesity, life expectancy, infant deaths, teenage births, homicides, imprisonments, and general health and social problems as the lowest among the twenty richest nations. Other rankings were second lowest for child well-being and illegal drug use and fourth worst for math and literacy of fifteen-year-olds. ¹ In addition to having the highest income inequality, according to the OECD, America’s financially related rankings, based on a nation’s percentage of gross domestic product (GDP), include the largest budget debt and lowest gross public spending, taxes paid, and foreign aid. Meanwhile, corporate tax revenues as a percentage of GDP have steadily declined from just less than 6 percent in the early 1950s to about 1 percent in 2009. The nation’s current net taxes paid, as a percentage of GDP, is less than the post-WWII average. ² Thus, by an internationally adopted standard, the current net American tax burden is a light load for both individuals and corporations. But how, during the 1950s and 1960s, was the United States so successful in creating and equitably sharing great prosperity with those citizens who created it, only to see this progressive era fade into the Great Recession? Well, fifty years ago, the United States and European nations collected about the same percentage of total taxes as a percentage of GDP: about 30 percent. However, since 1965, this percentage has remained constant in the United States (that is, no increase in the percentage of GDP devoted to taxes), while European nations increased their percentage from 1965 to 2009, on the average, by 10 percent. ³ Consequently, compared to the United States, at least nineteen of the world’s most developed nations have a greater degree of income equality, assume a higher tax responsibility, and

consistently attain higher levels of well-being for a variety of problems across their total populations. But what American politician could survive an election process preaching a message of severe income inequality? No one could, despite the fact that this fundamental problem with the US economy has denied the middle class a fair share of the nation’s historic prosperity, thus lowering the nation’s collective purchasing power to the extent of creating a recessionary economy. What corporate executive could survive telling stockholders they should receive a lower return on their investments so as to increase middle class wages, which have been stagnant for three decades? Furthermore, what political party could survive with a message that, according to accepted international standards, Americans should be paying higher taxes to finance world-class public education, health care, and public and social services? Obviously, the answer to each question is “none.” Such propositions are counter to the prevailing theme that greed is good for America and to the reality that truth is what a culture wishes it to be as opposed to what it actually is. Such is the myth of trickle-down economics of the post-1980s, associated with the misconception that a free market economy promotes the general interest of the people. In 1864, Charles Dickens warned in Hard Times , “I am sure you know that the whole social system is a question of self interest. What you must always appeal to is a person’s self interest.” ⁴ In The End of Laissez-Faire (1926), John Maynard Keynes also disagreed with those who saw free markets as inherently providing just resolution among competitive forces: By the working of natural laws individuals pursuing their own interests with enlightenment in conditions of freedom always tend to promote the general interests… . It is not true that individuals possess a prescriptive “natural liberty” in their economic activities. There is no “compact” conferring perpetual rights on those who Have on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the Principles of Economics that enlightened self interest always operates in the public interest. Nor is it true that self interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear sighted than when they act separately. ⁵ The intent of this volume is to draw attention to and examine major elements of America’s escalating self-destructive journey of the past halfcentury, which have imposed historic, debilitating socio-economic consequences on all but the extremely rich. The nation’s past internationally recognized and deserved image of having achieved a high degree of exceptionalism has become substantially diluted. The dominant cultural driving forces of this socio-cultural transition have been an infectious, greedy materialism created by historic post-World War II global prosperity and a political right-wing response to the post-1960s progressive civil and human rights revolution. As a consequence, interrelated and interdependent

social, economic, and political forces have attacked, manipulated, and demeaned fundamental democratic principles. The ideological justification offered represents a self-serving and self-righteous brand of narcissistic individualism, a false and perverted sense of “compact conforming perpetual rights… that individuals possess a prescriptive ‘natural liberty’ in their economic activities.” Restoring American exceptionalism begins with renewing the altruistic values of a societal-oriented individualism, re-establishing higher individual and professional ethics, and a recommitment to the principles of Athenian social justice and the public and common good. After all, these are the cultural characteristics that originally created US exceptionalism. The Narrative: America I s Self-Destructing A society does not ever die “from natural causes,” but always does from suicide or murder—and nearly always from the former. ¹ Arnold J. Toynbee Since the time of ancient Greece, each of the world’s most successful civilizations has ultimately reached a plateau of economic prosperity and cultural advancement, acquiring a seemingly limiting degree of maturation, a prolonged and unresolvable economic stagnation, a declining middle class, and ineffective governance. Such cultural stagnation and degradation are representative of Toynbee’s “breakdown” stage of cultural development and a precursor to the “deterioration” stage. Over the last half century, America has gradually accumulated a profile of cultural characteristics representative of the self-destructive pathway followed by past great civilizations and is approaching its limiting degree of maturation and the zenith of its global prominence. America’s self-destruction is a consequence of abused historic prosperity; excessively self-oriented, self-indulgent individualism; and failed human values and behavior, which have gradually demeaned and diminished the ideals of Athenian democracy and the ethic of principle, thereby stifling the attainment of social justice and the maintenance of the common good. In its quest for unremitting socio-economic prosperity and preeminent global influence, America has acquired a level of complexity, disorder, and dysfunction that appears to exceed humankind’s capabilities to tame and manage. American society’s degradation has been extensive, severe, and mostly ignored; it is also expanding at an exponential rate. The nation’s unethical business, political, and financial systems; corporate domination of politics; ineffective government; record individual and public debt; rampant incivility; and record inequity of wealth distribution represent extreme systemic moral shortcomings and a failure of fundamental societal institutions. Corresponding flawed behavioral traits reflect severely defective human attitudes, values, ethics, and priorities, which, for mature societies, have historically led to major self-inflicted, culturally degrading consequences. Current American symptoms include the rationale for conducting decades of

elective foreign wars; the ethology of the Wall Street financial collapse; the nation’s inability to unify after the Great Recession in a spirit of common cause; continuing barriers to racial, ethnic, and gender inclusiveness; and the lack of response to the decades-long erosion of the nation’s infrastructure, sliding quality of public education, and lowered professional ethics and standards of conduct. Such a striking, repetitive historical profile has motivated sociologists and historians over the ages to seek explanations for what is often described as societal self-destruction. Accordingly, in the second decade of the twentyfirst century, scholars are questioning the continued supremacy of Western civilization. In 2011, Niall Ferguson suggested, “We are living through the end of 500 years of Western ascendancy.” ² The financial crisis that began in the summer of 2007 should therefore be understood as an accelerator of an already well-established trend of relative Western decline. ³ Arguably, the most shameless and revealing defective cultural characteristic of America’s soul is manifest by the national ongoing debate as to whether the approximately forty to fifty million citizens who are without health insurance should be guaranteed health benefits. The resulting physical pain, emotional stress, social anguish, and lost socio-economic opportunities that have been inflicted upon so many Americans by the most prosperous nation in the world is the personification of a selfish, materialistic society that has lost its bearings, a breakdown of public morality. In 2012, a Harvard University report demonstrated that extending the Medicaid program in three states for low-income adults not normally eligible for Medicaid, but who would be included under a provision of the Affordable Care Act, scheduled to be implemented in 2014, would result in a 6.1 percent decline in the death rate. This corresponds to 2,840 fewer deaths per year for every 500,000 persons included in the program. ⁴ However, Republicans uniformly vow to repeal or cripple implementation of the act as being unaffordable and an unwise, improper government takeover of health care, despite the evidence and common sense that universal health care would prolong the lives of many citizens—and ignoring the fact that the nation occupies the lowest life expectancy ranking among the twenty richest nations. All nineteen of those other nations provide their citizens with universal health care. ⁵ Unfortunately, the lack of empathy for those unable to afford and secure adequate healthcare is consistent with the same indifference of the general public, corporations, and political leaders toward the forty-four million Americans, or 14 percent, who live in poverty. This nation is badly served by such a warped, self-oriented mentality, a gross lack of empathy that has infected American society. More broadly, the nation’s precipitous decline among the world’s most prosperous nations during the last three decades to low international rankings of health, education, and public support for improving the living standards of average people should provide a striking wakeup call for American society.

If Toynbee viewed twenty-first-century America’s “time of troubles,” he (along with other early nineteenth century contributors to the literature of civilization studies) could justifiably comment that he got it right (see his quote at the beginning of this chapter). Additionally, he points out that each civilization enjoys its era of socio-economic prosperity and assumes that good fortune will continue unabated forever, but ultimately it succumbs to “the mirage of immortality.” ⁶ Human history has not seen a civilization that has avoided the pathway of cultural breakdown, degradation, and collapse. Samuel Huntington notes, “History ends at least once and occasionally more often in the history of every civilization.” ⁷ There is a misconception that most civilizations collapse as a result of being overrun by invading barbarians. However, the usual agents of debilitating cultural degradation are misguided and self-serving values, objectives, priorities, and behavior; wasteful and excessive consumption of personal wealth; and the unprincipled stewardship of national wealth, energy, and human resources. A. L. Kroeber notes, “Cultures inherently tend to progress… . Fluctuations of cultural vigor are normal… . The reason for the fluctuation is that… with successful development they accordingly become exhausted and that there must be a breakdown or abandonment and reformulation of patterns before the culture can go on to new high achievement. That there is some tendency for the several patterns of one culture to form, to culminate, and to dissolve or atrophy simultaneously, is, I think, obvious.” ⁸ He notes that the real question is why particular cultures die. Pitirim Sorokin, pondering the history of Greco-Roman Western civilizations, rhetorically frames the question as, “Where shall we look for the roots of change of socio-cultural phenomena?” ⁹ He responds that the system “bears in itself the seeds of its change” and is driven “by virtue of its own forces and properties.” ¹⁰ These early authors of twentieth-century civilization studies, having independently completed exhaustive, well-respected scholarly works, conclude that cultures, over time, essentially destroy themselves. Appropriately, Will Durant observes, “the fall of Rome, like her rise, had not one cause but many, and was not an event but a process spread over 300 years.” ¹¹ Evolutionary Patterns of Social Orders and Human Behavior During the course of human history, social orders have exhibited common evolutionary patterns of cultural maturation, which inherently increase social, political, and economic complexity and dysfunction. Additionally, societal advancement innately creates a shifting cultural mentality, progressing from prevailing altruistic values of civility and spirituality and the ethic of principle toward greater individual sensate values of selfinterest, materialism, and ruthlessness and the ethic of happiness. This transition represents shifting cultural priorities from employing an intense mental discipline and physical labor required to create economic growth and prosperity to a higher priority of maximizing personal enjoyment, leisure time, and happiness. As a result, community oriented priorities, social

cohesion, and mutual cooperation and respect are gradually diminished over generations, while self-oriented ambitions, rationalizations, and outcomes become an acceptable norm. Durant describes the culture transition: As civilization develops, customs, institutions, laws, and morals more and more restrict the operations of natural impulses, action gives way to thought, achievement to imagination, directness to subtlety, expression to concealment, cruelty to sympathy, belief to doubt; the unity of character common to animal and primitive men passes away; behavior becomes fragmentary and hesitant, conscious and calculating; the willingness to fight subsides into a disposition to infinite argument. ¹² Inherently, societal development continuously creates higher levels of organizational and functional intricacies and associated human stress and perplexity, which gradually shape a greater nonfunctional, incomprehensible social order for an increasingly larger segment of the population. Carroll Quigley describes this cultural sequence as “reaching a crisis of organization and function… its vigor and morale have weakened… it becomes stabilized and eventually stagnant.” ¹³ This escalation of the progressive rudiments of societal maturation , reaching “a crisis of organization and function,” include the proliferation of increasingly expensive and highly convoluted processes, bureaucracies, policies, laws, regulations, and codes as well as modes of transportation and communication. Theoretically, the intention of such societal advancement is to continuously provide more effective, efficient, productive, and equitable outcomes that will improve the human experience for all members of society. However, the history of civilizations has demonstrated that ultimately socioeconomic advancement concentrates economic rewards and political influence on a small minority. In a repeat of the nation’s Great Depression experience, America’s most wealth individuals and corporations have successfully manipulated, and now dominate, the nation’s highly nontransparent and complex economic, financial, and political systems to best serve their interests. In the process, professional ethics have become severely tarnished and state and federal government systems have been corrupted and manipulated as human nature has once again succumbed to Big Money. Mark Twain noted, “It is not worthwhile to try to keep history from repeating itself, for man’s character will always make the preventing of the repetitions impossible.” ¹⁴ Accordingly, America has suffered through two recessionary cycles as a result of shortcomings of “man’s character” and the allure of wealth and power, as history continues to repeat itself. How did American society get to this disgraceful, chaotic state, repeating this well-worn pathway of shameful behavior that other failing societies have traveled that corresponds to Toynbee’s “time of troubles” and his sequence of cultural breakdown, stagnation, and degradation? The major components leading to America’s Great Recession first emerged during the late 1970s and 1980s, proliferated, matured, coalesced, and ultimately contributed to a significant post-1980s socio-cultural transition, a reversal of the pendulum and momentum of America’s post-WWII

progressive era. The centerpiece of this ongoing socio-cultural transition is a broad set of mutually reinforcing, self-serving conservative ideological forces, which encompass white supremacy; extreme corporate and individual self-interest and greed; arbitrary constrains of human rights; a lack of compassion for the well-being of the less fortunate; and a reckless strategy of non-compromising, winner-take-all politics. Major contributing social, economic, and political elements of this post-1980 conservative movement, which are still unfolding, include, first, the South’s backlash to the 1960s civil rights legislation and the continuing expansion of the nation’s broader rights and freedoms provided the nucleus, the catalyst, and electoral momentum for a political conservative crusade. Second, as a result of civil rights legislation, the national Republican party, having experienced little success in House and Senate elections since 1932, discovered, during the 1970s, a new vehicle of opportunity in the rapid and overwhelming “Great White Switch” of southern Democrats to the Republican party. Ironically, the new post-1980s Republicanism was molded based on the culture of the Old South and the 1950s southern Democratic party membership. Third, by 1980, in the midst of economic prosperity and increasingly aggressive federal government regulation of business, the emergence of the national conservative movement of new Republicanism presented corporations and wealthy individuals with an opportunity to enhance their political influence and add to their corporate profitability. Utilizing their wealth and organizational skills, the objective was established to bring together a strong, broad-based voter coalition of “newly minted” southern Republicans; northern conservatives of all political persuasions; small businesses; and major corporations to embrace a broad agenda of common conservative interests. These included lower corporate and personal taxes; less government regulation of banking, business, and the environment; and conservative social and religious issues, particularly those of the Deep South and evangelicals, all representing at least one major objective of the selforiented financial, spiritual, philosophical, and moral agenda. Fourth, by the 1990s, Big Money had succeeded in purchasing the minds of politicians and in funding, reorienting, and strengthening the personnel, agendas, vitality, and organization of many of the nation’s nonprofit business organizations, such as the US Chamber of Commerce, and establishing an army of lobbyists to carry the corporate mission. Additionally, corporate wealth’s creation and control of partisan think tanks and media outlets and the proliferation of modern communication technologies has contributed to a broad distribution of political propaganda and disinformation. Also, judicial decisions have continued to allow the legal flow of enormous quantities of anonymous money into the election process, even within the judicial branch. Fifth, corporate-political alliances, possessing unlimited corporate and private money, have successfully created and orchestrated a broad scope of business-friendly legislation through the governance systems of Washington and state houses. The effects have crippled the economy, paralyzed

governance, achieved record public indebtedness, and created abundant lower and middle class suffering at a level not encountered since the Great Depression. Joseph Stiglitz identifies the objective of the money people: For those with money, spending it to shape the political process is not a matter of civic virtue; it is an investment, from which they demand (and get) a return. It is only natural that they end up shaping the political process in their interests. ¹⁵ By the 1990s, Big Money, utilizing a sophisticated makeover of the former 1950s southern Democratic party, was successfully marketing a broader national conservative agenda with a Republican party label. By the 1990s, this had provided the necessary electoral successes to reach the primary objectives of controlling the course of American politics and recording historic profits for both corporations and the top few percent of the nation’s wealthiest individuals. Effective corporate lobbying and political donations have shaped legislation that legalized and shielded financial abuses from regulators, credit rating systems, and the public and have played a major role in the current global financial and economic crises. The resulting home mortgage market collapse, ill-advised tax policies, and loss of retirement and pension funds have been direct consequences of the same mechanism of corporate-political collusion. An unholy corporate-political alliance has affected the markets, making them discriminatory and neither efficient nor effective (but extremely profitable for the nation’s wealthiest corporations and citizens). Beginning in the 1980s, the political influence of the business sector has been very successful in minimizing, eliminating, and preventing government regulation of the financial industry. Specifically, this effort has provided the legal strategies, money, and tactical assistance to grease the pathways and remove legal obstacles for the financial industry to manipulate the nation’s financial markets and create an inequity in wealth of historic proportions, one detrimental to the middle class economy. Likewise, in the aftermath of the more recent Wall Street collapse, proposed legislation deemed necessary to establish and maintain the necessary regulation of the investment industry so as to avoid another such scenario has been met with massive, coordinated political and corporate resistance. Furthermore, the inability or unwillingness of those responsible for securities credit ratings and regulatory functions has not become more efficient or effective. Stiglitz adds, “The power of markets is enormous, but they have no inherent moral character.” ¹⁶ Something has happened to our sense of values, when the end of making more money justifies the means, which in the US sub-prime crisis meant exploiting the poorest and least-educated among us. Much of what has gone on can only be described by the words “moral deprivation.” Something wrong happened to the moral compass of so many of the people working in the financial sector and elsewhere. When the norms of a society change in a way that so many have lost their moral compass, it says something significant about the society. ¹⁷ Unequal, Inequitable, and Shameless Distribution of

National Wealth The resulting inequitable distribution of national wealth over the last three decades, which allocated relatively meager annual wage increases to a great majority of Americans, has gradually gutted middle-class purchasing power and stalled the national economy. Since the 1970s, the corporate influence on Washington politics has gradually and systemically produced lower tax rates on income, inheritance, corporate profits, and capital gains, which unnecessarily benefited extremely wealthy Americans. Ultimately, politics not economics has produced excessive income inequality by virtue of tax policy orchestrated by the wealthy, which has been the major contributor to the economic stagnation leading to both the Great Depression and the Great Recession. Accordingly, Big Money has been successful in capturing historic levels of corporate profits, individual income gains, and accumulated wealth, while middle class income has stagnated. Meanwhile, the nation has incurred a record national debt, in large measure from inadequate tax revenues as measured by the percentage of gross domestic product (GDP), an internationally accepted standard for measuring created national wealth. Over the past fifty years, total federal tax revenues as a function of national wealth have remained relatively constant, within 15 to 20 percent of the nation’s GDP. However, corporate tax revenues as a percentage of GDP have steadily declined, from just less than 6 percent in the early 1950s to about 1 percent in 2009. ¹⁸ By 2009, due to the 2001 Bush tax cuts, the nation’s tax revenues had declined to the lowest level as a share of the economy since the 1940s. But government expenditures relative to GDP have steadily increased, from about 15 percent in 1947 to 20 percent in 2007, jumping to 25 percent in 2009. ¹⁸ Apple, one of America’s most profitable corporations, provides an illustration of creative corporate tax avoidance. In 2011, Apple paid cash taxes of $3.3 billion worldwide on reported profits of $34.2 billion, a tax rate of only 9.8 percent. ¹⁹ To contrast the fortunes of the middle-class, consider that during the 1960s, the lower 90 percent of households accounted for more than half of America’s income gains , whereas the era of great prosperity from 2002 to 2007 brought more than half of income gains to the wealthiest 1 percent. In 2011, this 1 percent of the population possessed greater net worth than the lowest 90 percent, ²⁰ and six times the financial wealth of 80 percent of Americans. In 1955, the 400 wealthiest taxpayers had an average income of $13.3 million, in 2008 dollars, and were taxed, on the average, at a rate of 51.2 percent. In 2008, this group had an average income of $270.5 million and was taxed at an average rate of only 18 percent, ²¹ whereas by 2011, they possessed greater wealth than the bottom 150 million citizens and were taxed at an average 17 percent. ²² Two conclusions: First, the nation’s budget deficits have been the result of steadily increasing federal spending as corporate tax revenues, as a

percentage of their profits, have steadily declined. Second, this history demonstrates that the concept of trickle-down economics has been an economic failure for all but the super-rich. Thirty years ago, when Forbes magazine published its first list of the top 400 wealthiest Americans, $75 million was sufficient to get on the list, whereas in 2011, the figure was $1.1 billion. The cumulative net worth of the 400 people on the 2011 list increased by $200 billion, compared to a 4 percent decline in the median household income in 2011. ²³ Financiers have adopted a winning strategy of maximizing their income into the capital gains category in order to benefit from the 15 percent tax rate. This is particularly beneficial for those who have inherited their wealth, which is estimated to be 40 percent of those on the Forbes list. In 2011, the 400 accounted for 16 percent of all capital gains. ²³ To illustrate the new normal for the top annual compensation award, consider that in 2006, the top twenty-five hedge fund managers earned an average $600 million, with the top being $1.7 billion. As a result of a tax loophole, these earners were taxed at the capital gains rate of 15 percent rather than the normal or statutory 33 percent rate for their income level. Loss of Middle Class Purchasing Power and a Stagnant Economy Not surprisingly, the lower socio-economic segment of American society, having undergone three decades of stagnant income gains and net wealth, while assuming increasing debt, have substantially reduced their consumption of goods and services. The decline in purchasing power for over half of the population due to declining real wages has resulted in reduction of industrial production levels and general business activity. As demand declines, so does production. Businesses are unwilling to invest capital to expand production, offer new goods and services, and undertake new construction, as long as potential consumers do not possess the necessary financial means to spend. Hence, an anemic economic growth rate continues to reduce money circulating throughout the economy, thereby contributing to a progression of recessionary conditions. Importantly, a nation’s reliance on consumer spending by the wealthiest segment of Americans, who overwhelmingly benefited from three decades of economy gains, is not a feasible solution for a stagnant economy. Their level of consumer spending alone would be insufficient to create a growing and stable economy. To illustrate, in the fall of 2011, according to Moody’s Analytics , Americans with the highest 5 percent of income accounted for only 37 percent of all consumer purchases. ²⁴ Hence, the combination of declining business revenues, worker income, and consumer consumption only prolongs or deepens a recessionary economy. In any event, economic renewal requires mutually supporting, broad-based economic activity capable of balancing goods and services production, consumer spending, and financial investment. Lacking such economic

stability, those individuals and corporations able to hold their wealth waiting for investment opportunities will do so, while those less fortunate will go into debt or suffer crippling losses of assets. Accordingly, as of 2012, American corporations are estimated to have between $1 and $2 trillion in investment capital waiting for consumers to start spending, representing the dilemma of the proverbial chicken and egg. The most conspicuous example of America’s current flawed values, ethics, and priorities is the criteria upon which the nation’s economic prosperity is evaluated by economists, judged by the public, and disseminated to the public. A review of news media coverage would reveal utmost public admiration for such financial successes as corporations with billion-dollar profits, golden parachutes of hundreds of millions of dollars for fired CEOs, yearly billion-dollar hedge fund earners, and multimillion-dollar compensation packages for professional athletes and college football and basketball coaches. Generally, these highly envied segments of society represent those with the greatest talent for creating revenues for the primary purpose of generating maximum profits for individual investors and institutions. In stark contrast, those public entities and employees that bear the responsibility to educate children and to provide essential social services for the poor, hungry, homeless, handicapped, and ill have been assigned the lowest salary and budget priorities, reflective of low political clout and public support. In contrast to American society’s preoccupation with maximizing the financial success of individuals and corporations at the expense of the lower and middle classes, Japanese and Scandinavian societies place high national priorities on more societal-oriented goals of national success. Among the twenty richest nations, Japan and three Scandinavian countries have the smallest income inequality among its citizens and also rank among the six countries having the lowest level of health and social problems. Their primary national goal and economic objectives are founded on altruistic values, compassion for all citizens, promoting the common good, and achieving a fair and just society (i.e., the most important ideals of a democracy). In contrast, in 2010, of these twenty wealthiest nations, America had the highest budget deficit, lowest tax revenues, and lowest public spending on health and social problems, relative to the percentage of its GDP, and had the lowest increase in tax-to-GDP ratio for the period from 1965 to 2009. ²⁵ To emphasize the point, based on international rankings, the other nations were better providers of food, shelter, education, and health care for their total populations than the United States, while the United States collected the lowest percentage of its increase in national wealth as taxes and had the highest income inequality . Nations with a greater degree of income equality consistently had higher rankings of well-being across their total populations and for a variety of problems. Clearly, the quantitative and qualitative criteria for evaluating the success of a national economy must extend beyond total annual wealth production and address the equitable and fair distribution of the nation’s prosperity, in accordance with the democratic principles of social justice and common

cause. Failure to pass this litmus test has historically led to a nation’s severe cultural degradation and ultimate collapse. According to Jeffrey Sachs: A closer look at those at the top of the wealth distribution shows that more than a small part of their genius resides in devising better ways of exploiting market power and other market imperfections—and, in many cases, finding better ways of ensuring that politics works for them rather than for society more generally. ²⁷ As wealth becomes increasingly concentrated among the elite, a lack of middle class earning and purchasing power gradually reduces the rate of economic growth, and thus a vast majority of the people experience severe reductions in their quality of life. Ultimately, the socio-economic system stagnates within a cultural environment of business and political corruption, as the social order becomes devoid of respectable standards of values and ethics, which has proven to be the historic Achilles heel of Western civilization. Over the millennia, the world has witnessed this same script being played out, as various Western nations have risen to the pinnacle of economic and military success only to self-destruct. Money, greed, and ideology ultimately trump social justice and common cause. But some of these nations ultimately stabilize, “joining the list of nations offering the best quality of life” rather than striving to head the GDP per capita list. David Rothkopf describes this evolutionary history: Countries that at different times in history were among the world’s greatest powers, such as Sweden, the Netherlands, France, Britain, and Germany, have gradually shifted their sights either in the wake of defeat or after protracted periods of grappling with decline, from winning the great power sweepstakes to topping the lists of nations offering the best quality of life. ²⁸ Lessons Not Learned from History: Wise Investments of National Wealth Based on experiences during the last three-quarters of a century, one would think that experts in finance, sociology, psychology, accounting, and economics would have been better able to manage the nation’s socioeconomic health for the period since the Great Depression. However, another lesson of history is the commanding influence of unwise and imperfect human behavior, which tends to emerge from the masses when opportunities exist to acquire abundant wealth, power, and status. The pre— and post-Great Recession periods demonstrate that human nature presents formidable hurtles to learning lessons that should have been absorbed from harsh past experiences. However, the same corrupt corporate and political behavior leading up to the Great Depression and the current Great Recession still exists, and it stifles the renewal of the nation’s cultural vitality and economic capabilities. The lesson, according to Michael Thompson, is the following:

Where the riches are in a few hands, these must enjoy all the power and will readily conspire to lay the whole burden on the poor, and oppress them still farther, to the discouragement of all industry. ²⁹ To fully appreciate the nature and consequences of America’s pre—and postGreat Recession, it is instructive to examine the objectives, priorities, and consequences of the investment of national wealth. Increasingly, during recent decades, aggressive corporate competition, obsessively intended to maximize short-term profits, has resulted in an irrational, overly committed priority on production categories lacking the capability of generating adequate capital necessary for reinvestment in areas critical to the nation’s economic growth. The nation’s wealth has become excessively consumed for production of frivolous consumer goods and services, military expenditures, and repayment of public debt, the totality of which results in inadequate investment capital to maintain a critical level of economic vigor and vitality. That is, the totality of this nation’s random business priorities and capital investments and its public expenditures do not sufficiently address the country’s optimal needs for production of strategic good and services, while also regenerating adequate capital for the next round of investments. This includes maintaining the efficiency and improving the effectiveness of improvements to the nation’s infrastructure, public education, health care, basic research, and public and social services. Such desirable outcomes inherently require a continuous source of new investment capital to address the country’s highest priorities. To emphasize the point, a continuously growing, stable, and generally satisfying socioeconomic system will require an organized national capability to sustain a positive rate of economic growth. This necessitates an adequate level of tax revenues, relative to the nation’s GDP, and a continuously available supply of private capital to sustain healthy and profitable private investments. Trickle-Up or Trickle-Down Economics? The United States, in the grips of record, unsustainable public debt, suffers economically from historic low tax rates and numerous tax loopholes for corporations and the most wealthy Americans, as members of the middle class are burdened with record personal debt, stagnant income, and descending socio-economic status. Meanwhile, the nation continues to be subjected to a propaganda campaign regarding the alleged wisdom of low tax rates for corporations and the wealthiest Americans, which will supposedly create more jobs and greater tax revenues. The concept is promoted as a way to create trickle-down wealth to support a strong middle class economy, but historically that has never materialized. According to the Tax Policy Center of the Bureau of Economic Analysis, data since 1913 of GDP versus marginal tax rates provide no correlation between tax reductions and economic growth. ³⁰ Rather, economists overwhelming call for a combination of increases in tax rates (which are at a historic low) and reductions of federal expenditures in order to address the recessionary economy and reduce public debt. However, what has been clear during the post-Great Recession is that the nation’s financial, business, and political institutions have been unable or

unwilling to collaboratively create and execute a national strategic plan to reinvigorate the economy and re-establish an American prosperity that equitably benefits all members of society. The dynamics of a socio-economic system may be depicted in terms of its institutional structures, organization, and functional processes, which consume wealth, energy, natural, and human resources. Additionally, cultural values and intellectual and creative assets are also vital to the healthy stewardship of a social order. However, an unpredictable, unwise, and unethical human element, associated with cultural evolution, influences the degree of success or failure of human ambitions, motivations, and initiatives. Such unproductive human behavior often escalates within a social order as it matures and becomes more successful. Socio-economic prosperity inherently thrives on and creates tantalizing opportunities and incentives, which, over the course of history, have proven capable of motivating individuals to become more independent, self-serving, and competitive in pursuit of their personal agendas. As a result, some wellestablished cultural values, attitudes, and behavior, once vital to success in more primitive stages of development, are modified or rejected over time. Furthermore, the extent of the modification of cultural values is proportional to the magnetic appeal of the envisioned incentives and rewards as well as the intensity of societal competition in an environment that may range from fear for survival to fear of missing out on one’s share of abundant economic prosperity. Pitirim Sorokin offers a model of socio-cultural transitions, based on the concept that, within a prosperous social order, cultural values, ethics, and behavior are gradually modified. Convenient and self-enhancing cultural adaptation enables individuals to rationalize their desires and actions in order to profit from certain prospects and to achieve their financial, social, and political ambitions. Accordingly, in modern America, the characteristics of self-promotion, self-interest, exploitation of others, and excessive materialism have become prevalent, socially acceptable, and viewed as economic and political assets for a successful professional career. Dwindling Professional Ethics and Integrity The circumstances surrounding the financial fraud associated with the subprime mortgage scandal, and Wall Street’s creation of synthetic collateralized debt obligation (CDO) mortgage securities, provide a historic illustration of the catastrophic and widespread absence of values, integrity, and ethics among the most trusted and relied-upon professions of law, finance, and accounting. Goldman Sachs underwrote billions of dollars of mortgage securities for clients, which were created to fail; they advertised them as solid financial investments while betting on their failure. Their rigged gamble, dubbed “the big short,” has been compared to playing a casino’s roulette wheel and betting on black when the potential success of red was zero. As a result, in 2007, Goldman Sachs had a record profit of $11.4 billion. However, i n April 2010, the Securities and Exchange Commission (SEC) sued Goldman Sachs and an executive for civil fraud in creating, marketing, and facilitating synthetic CDOs related to the financial

performance of the mortgage market. ³¹ Goldman settled the case without having to admit guilt and paid a record fine of $550 million (a small cost of conducting a profitable scam). Testifying before Congress, John C. Coffee, a well-respected law professor at Columbia University, stated, “Such conduct is not only unfair, it has an adverse impact on investor trust and confidence and thus on the health and efficiency of our capital markets… . Once ‘placing the customer first’ was the clearly understood norm for investment banks, as they knew they could only sell securities to clients who placed their trust and confidence in them.” ³² Senator Carl Levin, when announcing his committee’s investigation of Goldman’s role in the nation’s financial crisis in 2010, stated that “investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis.” It is noted that prior to this Senate meeting, in 2010, Goldman Sachs had provided $15.3 billion in pay to employees and had added 3,200 more employees at a time when its CEO Lloyd Blankfein stated, “Market and economic conditions for much of 2010 were difficult.” ³³ In the aftermath of the Great Recession, and in order to stabilize the nation’s monetary system, billions of tax dollars were required to rescue the same firms that lost trillions of dollars for investors, which contributed significantly to the greatest economic crisis since the Great Depression. Meanwhile, millions of Americans lost their homes, retirement funds, and life savings and became unemployed. Ironically, people in the private and public sectors who were responsible for creating the crisis continue in positions of power and influence in Washington and on Wall Street, many having profited significantly from their failure of leadership. It is noted that in recent times, financial services has become the overwhelming profession of choice for the best and brightest new college graduates of the elite universities, as it offers the most lucrative compensation. In 2011, bankers, fund managers, and other financial professionals accounted for 16 percent of the total income earned by the top 1 percent of earners, an increase from 9 percent in 1979. The percentage of financial professionals in the top 1 percent of earners now approximates that of lawyers and medical professionals combined. From the 1960s to 1980, the finance group, on average, earned about the same as other professions within the private sector. However, with increasing deregulation and new highly complex investment products, the industry’s share of corporate profits grew from a fifth to almost a third from 1979 to 2006. This corresponds to the financial investment industry earning about 70 percent more in 2006 than the remainder of the private sector. ³⁴ As a result of massive corporate greed and deception, compounded by the failure of government regulators and rating agencies to meet their professional responsibilities, America, catalyzed a global economic recession. The strategy of many of the nation’s major corporations has been to continuously challenge society’s established legal, moral, and ethical

boundaries, while avoiding jail, a negative public image, and large fines. The primary objective has become achieving record annual profits and maximizing compensation for top management while, if necessary, bending or violating recognized ethical standards. Note that in 2010, Goldman Sachs’s ethics code included the expectation for “our people to maintain high ethical standards in everything they do.” However, it also included an escape clause for highly profitable opportunities: “From time to time, the firm may waive certain provisions of this Code.” ³⁵ The unethical, profit-at-any-cost value system and the fraudulent financial engineering of Wall Street investment and banking institutions, assisted by creative, sophisticated accounting strategies and friendly tax legislation, represent a massive abandonment of professional integrity. Within a democratic society, a strong cultural reliance on ethical interdependence should exist. Unfortunately, the gross self-interest of America’s professions, major corporations, political parties, and financial institutions has ruptured the constructive societal aspects of ethical interdependence in favor of crude individualism and opportunism. Kurt Anderson defines the “‘Me’ Half Century”: What has happened politically, culturally, and socially since the sea change of the late 60s isn’t contradictory or incongruous. It’s all of a piece. For hippies and bohemians, as for businesspeople and investors, extreme individualism has been triumphant. Selfishness won. From the beginning, the American idea embodied a tension between radical individualism and the demands of the commonweal. Axiomatic human rights include “Life, Liberty and the pursuit of Happiness”—individualism in a nutshell   .   .   . The self-absorbed “Me” Decade, having expanded during the 80s and 90s from personal life to encompass the political economy, will soon be the “Me” Half Century. ³⁶ Missing in Action: Social Cohesion, the Work Ethic, and Altruism America’s current cultural mentality, the culmination of the “Me” Half Century, differs substantially from its early history and the advancements that emanated from the industrial and agricultural revolutions . The past reveals that substantial socio-economic progress and positive cultural transformations occur when societies embrace a positive learning and work ethic, a sense of community and social cohesion, disciplined economic priorities, high standards of human values and compassion, and infectious initiative and creativity. Such individual and cultural traits have proven successful in promoting technological inventiveness; a healthy sense of competitiveness; pioneering products with expanding markets; innovative financial strategies; advancements in knowledge and research; and satisfying social and economic stability. Unfortunately, these cultural attributes, which were once nurtured in America’s schools, homes, and workplace and practiced by national leaders, have gradually become tarnished, eroded, and displaced, creating an infectious and all-consuming radical individualism.

Given this context, a comprehensive understanding of America’s fourhundred-year socio-cultural progression requires a focus on the genetics of the seeds sowed in colonial times and on the processes of their germination, flowering, and hybridization , which have produced the cultural climate of the twenty-first century. First, the genesis and early growth stages of American capitalism benefited substantially from the emergence and rapid expansion of the global age of science, new inexpensive energy sources, and more advanced technologies and tools of research and production. Second, the evolution of American capitalism, with its scientific and engineering inventiveness; innovative business practices; advanced production and distribution systems; and unique products, created historic wealth and catalyzed rapid economic growth. Economic prosperity reigned from the 1870s until the Great Depression of 1929, when income and wealth became concentrated within the top few percent of earners and the middleclass economy stalled. Third, America’s years of noteworthy socio-economic progress benefited from greater value being placed on unselfish values, a strong work ethic, self-reliance, and self-discipline than found in the mid-twentieth century. These characteristics were most intense during World War II and prevailed from about 1947 to the latter part of the 1970s, representing another era of expanding prosperity that uniquely benefited all segments of American society. However, the gradual degradation of these societal qualities and strengths in the post-1980s produced the same extreme concentration of wealth at the top as existed in 1929, contributing to the Great Recession. America’s Self-Destructive Journey: One Chapter of Western Civilization America has completed two recessionary cycles: the first, from the end of progressive era of 1870 to the 1929 Great Depression, and the second, from the end of the 1947 to 1975 progressive era, culminating in the Great Recession. Both pathways leading to deep economic recession were created by flawed human values and behavior. America replicated the cultural mentality, socio-economic patterns, and political characteristics that parallel those of the latter stages of ancient Greece and Rome, imperial Spain, and the British empire, as they spiraled toward cultural stagnation and collapse of their preeminent global position. Prominent historians and social thinkers of the early twentieth century have extensively analyzed the developmental stages of these failed civilizations. They include Toynbee’s stages of cultural development and Sorokin’s model of socio-cultural transitions. Additionally, Oswald Spengler’s vivid and extensive description of the loss of moral values, initiative, creativity, economic productivity, and social unity as being historically associated with societal deterioration and collapse is strikingly consistent with America’s gradual cultural decline during the last three decades. At this point, it is instructive to recognize that America’s financial and economic issues, associated with the Great Recession, while somewhat different, coincided with those of Greece, Italy, Ireland, Great Britain, and

other Western nations. America’s 2006 to 2008 financial and economic collapses represent only two segments of a broader and deeper global crisis, and the Wall Street’s sub-prime mortgage scam was just one aspect of the universally greedy and unethical behavior that contributed to the global financial meltdown. Worldwide individual, banking, and public debt increased from $84 trillion in 2002 to $195 trillion by 2008. Ireland’s debt grew to more than twenty-five times its annual tax revenues, and the debt levels of Spain and France reached ten times their annual revenues. ³⁷ In early 2012, Standard & Poor’s downgraded the credit ratings of France, Italy, Spain, Portugal, and four other European nations using the euro currency system. This action raised the costs for these nations to borrow money, increasing the uncertainty that some countries could resolve their economic problems. As with the United States, other Western nations have suffered from wildly excessive consumption, unsustainable public debt, crippling corporate greed, political corruption, and ineffective governance. Thus, the scope of global cultural degradation extends beyond America and corresponds to the predicted decline of a mature Western civilization, as portrayed in the early twentieth century by Toynbee, Sorokin, Huntington, Kroeber, and others. Truth as Defined by the Prevailing Cultural Mentality From a longer perspective of history, Western civilization is continuing a sixcentury trend of shifting philosophical currents of thoughts, which should provide sobering insights into America’s current human and institutional shortcomings. Sorokin noted in 1957 that since the fourteenth century, the relative influence of religious and idealistic rationalism (i.e., the truth of faith and reason) had declined from being the dominant Western influence to assuming less significance than the philosophical currents of empiricism and criticism. This transition translates into a significant loss of altruism and spirituality at the expense of more intense ruthlessness, self-serving priorities, and irrationalism. This very long-term trend, noted over a half century ago, is particularly noteworthy, as it is consistent with Ayn Rand’s political philosophy of objectivism, which re-emerged during the 2011-2012 political season as being representative of the anti-altruistic and extreme conservatism of the new Republican party, and particularly the long-held political philosophy of its 2012 vice presidential candidate, Paul Ryan. Consequently, over the centuries and within Western civilization, the truth of faith has gradually been displaced by the truth of the senses of the mind. The discipline and knowledge of science has become more influential than theology in defining what constitutes “accepted” knowledge and truth. The dynamic equilibrium of prevailing philosophical thinking within Western civilization has gradually but dramatically shifted over many centuries from an assumed infallibility and superiority of faith to increasing reliance on reason, philosophy, and the human senses. The ethic of principle has been replaced by the ethic of happiness, as cultural values and priorities increasingly reflect a more extreme individualism of self-indulgence and selfsatisfaction.

Additionally, Sorokin points out that a given sense of truth and knowledge, as embraced by a social order in a given era, is fundamentally and uniquely defined by the nature of its prevailing cultural mentality, “in a considerable degree a ‘function’ of the socio-cultural variable.” ³⁸ That is, the context of a culture’s dominant mentality, from a primary reliance on faith, reason, or the senses, will influence what is considered to be truth and knowledge. A highly religious Christian community may insist upon the teaching of creationism in their schools as the “truth of faith” and strongly object to the teaching of evolution, as they reject the “truth of science” as the accepted basis for truth and knowledge. Thus, truth and knowledge may be creatively fabricated within the context of a given established cultural mentality and its adopted set of values and representative disciplines of knowledge in order to serve predetermined, self-serving outcomes as well as to validate behavior and perpetuate uninformed biases. Some retirees, quite satisfied with and appreciative of Medicare health benefits and monthly Social Security checks, are heard to loudly object to any hint of reductions of such benefits. However, some are also found to object to the extension of health benefits to all citizens and to the provision of a social safety net for the less fortunate, as such policies might raise taxes, create a threatening budget deficit, or promote creeping socialism, which is equated to communism. Consider the abundance of misleading and false statements, statistics, and commentaries distributed by all forms of communication throughout America in recent times, purporting to be social, economic, or political truth and knowledge, which people encounter when seeking information (or have it thrust upon them). Such tainted public information is unlimited and crafted with the intent to misinform, deceive, or convince, most often to gain a commercial advantage in the marketplace or to capture political converts and votes. The objectives are to entice and promote enthusiasm for a cause, to purchase products and services, to donate money, or to elect someone to office by relying on fear, greed, distrust, anger, empathy, or discrimination. Political message content is often biased by ideological principles that often rely on negative personal attacks absent facts, devoid of integrity and rational thinking, and offering slanted or self-serving narratives. This strategy has become increasingly effective, as the complexity and time restraints of modern life have dramatically increased. Consequently, the average American devotes little time to thinking about the intricacies of economics, social issues, or governance. As a result, the media industries have dumbed down general programming and, more significantly, news and current events, in favor of mindless entertainment in order to increase audience ratings and advertising revenues and survive financially. Increasingly, newspaper, radio, and TV outlets have become strategic political tools to manipulate public opinion by skewing a large majority of programming toward promoting specific political ideologies and the agenda and candidates of one party. Such corporate media outlets unabashedly ignore traditional standards of journalistic professionalism and a societal responsibility to offer factual, balanced, in-depth coverage of important social, economic, and political issues. As a result, a large number of Americans tune in to those news sources that give them the political flavor

of news and events that they enjoy hearing, which is most often attacking opposing views. Arguably, one could conclude that it has become increasingly difficult, if not practically impossible, for average Americans to find high quality sources for in-depth news and current events; even if they could, they rarely have time to adequately digest the mass of highly complex social, economic, and political issues facing the nation. As a result, people in recent decades have shown great frustration, confusion, and indifference as the significance of their participation in political affairs has been diminished. It has become more convenient for people to simply accept attractive propaganda and cheer for the political team that appears to support their financial aspirations or social and religious causes and to oppose important issues according to a political party’s endorsement. Alternatively, many disillusioned citizens mentally and physically drop out of the electoral process. Voter participation for presidential elections traditionally average about 57 percent, whereas about 37 percent turn out in nonpresidential years to vote in House of Representative elections. ³⁹ Polarization of American Politics and Human Values A 2012 Pew Research Center for People and the Press survey entitled “Partisan Polarization Surges in Bush, Obama Years: Trends in American Values: 1987-2012” notes that since the 1980s, an evolving partisan divide in America has been propagated, in large measure, by racial and religious demographics; a self-centered, extreme conservative ideological drift; and the power of the nation’s most wealth elite to successfully influence, dominate, and control the nation’s governance system. The report emphasizes that “the defining change in American politics over the past quarter-century is not in overall public beliefs, but how these beliefs are increasingly being sorted along partisan lines.” Core members of both parties are “more homogeneous and less cross-pressured, and hold more consistently liberal or conservative views across a wider spectrum of values.” ⁴⁰ Perhaps the most serious ramification of this “partisan polarization” and the extreme intransigence of today’s politics occurred during the congressional debt limit crisis of 2011, which threatened to default the federal government. This most reckless and pathetic political performance represented the extreme of the nation’s political polarization, dysfunction, and irresponsibility. It was unforgivable for the tactics of brinkmanship and hostage-taking to replace a responsibility to serve the best interests of the nation in time of a national emergency. Quite appropriately, in October 2011, the public’s approval rating of Congress was only 9 percent, which did not appear to bother the congressional membership. Tom Friedman describes the current ineffectiveness of Congress, which has the lowest approval rating since such records have been kept: “A dysfunctional political system is one that knows the right answers but can’t even discuss them rationally, let alone act on them.” ⁴¹ Thomas E. Mann and Norman J. Ornstein assessed the debt limit extension exercise: “The battle was a template for all that is wrong with contemporary

society and politics. Balancing interests, conducting meaningful deliberations and debate, respecting adversaries and, most of all, focusing on problems solving all took a backseat to the Republicans’ take-it-or-leave it bargaining positions… . Default was no big deal.” ⁴² The values and priorities of Senate Republican Minority Leader Mitch McConnell were revealed when, about two weeks prior to the crisis being averted, he signaled that it was time to end the hostage-taking, as going into default “is very bad positioning going into an election,” i.e., for Republicans. Further, he commented on the strategy of holding the debt limit hostage: “What we did learn in this—it’s a hostage worth ransoming… . It set the template for the future.” ⁴³ Sadly, the deceitful and dysfunctional new version of Washington politics has increasingly ignored the declining socio-economic status of a large segment of the American public, dismissing the historical importance of common cause and social justice, as well as the wisdom that human social and political conflict is best resolved through compromise, compassion, and civility. Unfortunately, political attitudes and tactics have become highly aggressive, polarizing, uncompromising, and unsympathetic toward opposing views, extending little regard for the collateral damage of achieving narrow, self-serving political goals. Political objectives now entail winning every aspect of every battle at any cost in order to be in a power position for the next election, rather than governing by way of rational discussion, negotiation, personal integrity, and civility in order to achieve important national objectives. In October 2010, less than two years into the Obama administration, McConnell publicly acknowledged the party’s strategy to oppose any presidential initiatives that might prove favorable toward his re-election with the comment, “The single most important thing we want to achieve is for President Obama to be a one-term president.” ⁴⁴ Uncompromising legislation agendas, brinkmanship, and completely hostile opposition to any proposal deviating from core party principles (no matter how dubious) compose the standard political attitude and tactics, regardless of outcomes. Individual members of Congress find it career ending to compromise party ideology and ignore lock-step voting directives. To seek out potential elements of compromise on major issues with the opposition party, much less to agree upon and vote for bipartisan legislation, will result in your party contributing money to end your career, albeit democratically at the next primary when they finance a primary opponent. Given current congressional behavior, it is noteworthy that empiricism, which assumes that the senses and emotions are the primary judge of truth as opposed to faith and reason, is at its highest relative level in 2,500 years, followed by criticism and skepticism. This profile of dominant philosophical currents of thought, which also includes the gradual relative disappearance of rationalism since the fifteenth century, accurately represents the current, prevailing tone of the overly irrational, critical, and skeptical “adult conversation” in America, even beyond political matters.

Unfortunately, America’s last few decades of systematically abusing its national wealth, natural resources, and human potential as well as degrading past high standards of values, ethics, and integrity must be considered relative to the annals of human history, as documented by the literature of civilization studies. Based on four thousand years of human history, civilizations that have followed this pathway ultimate followed Toynbee’s sequence of cultural breakdown, followed by stagnation, ultimately achieving rejuvenation (as in the case of modern China), longterm “ossification,” or full collapse (as occurred in ancient Rome). But Toynbee had it right. America is simply repeating the self-destructive patterns of past great Greco-Roman Western civilizations. Chapter I America’s Corrupt, Dysfunctional Society : Loss of Cultural Values, Ethics, and Integrity A great civilization is not conquered from without until it has destroyed itself within. The essential causes of Rome’s decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars. ¹ Will Durant The first decade of the twenty-first century bears witness to America’s continuing inability to fashion a sustained, effective, intellectually honest, and constructive effort to reverse decades of escalating cultural degradation and dysfunction. Flawed human behavior within business, financial institutions, and politics has severely crippled the fundamental institutions and functions of the nation’s social, economic, and political systems. The lack of high standards of ethics, integrity, and civility, and the lack of respect for the democratic principles of common cause and social justice within the general population, represent a national embarrassment. Most notably, there has been a paralysis of government, such as during the crisis of raising the federal debt ceiling during the summer of 2011 and the 2012-2013 financial cliff budgetary standoffs, which represents all time low points for the lack of political leadership and lack of respect for the democratic process. What has happened to the country’s fundamental principles, values, and ideals, which, half a century ago, provided the socio-political pathway, economic principles, and cultural attitudes to achieve unparalleled economic greatness that equitably benefited all Americans? America’s Post-1970s Theme: Greed Is Good The search for answers may be found in four thousand years of human history, specifically from lessons not learned from the collapse of past highly successful nation-states. Accordingly, the primary source of escalating crisis and disorder associated with cultural breakdown and economic stagnation is not the human capability to intellectually design and execute appropriate responses to adversity, but humankind’s inability to behave in accordance

with the universal tenets of the golden rules represented by the good books of formal religions. Clearly, human history demonstrates that abundant socio-economic prosperity creates a highly competitive cultural environment, which diminishes humankind’s respect for and adherence to the fundamental principles of democracy and to the universal benefits of social cohesion. Accordingly, during the last few decades, the lack of integrity and increase in ethical deficiencies have become more evident, intense, and destructive among America’s major corporate and political institutions and their leaders, who have been entrusted with reversing decades of severe social and economic instability and inequities. America desperately needs a critical mass of capable, disciplined leaders and followers possessing sufficient integrity, initiative, and wisdom to embrace and promote altruistic attributes and democratic principles associated with the nation’s successful beginning. Unfortunately, many influential economic, political, and intellectual players, having been caught up in a modern gold rush of self-indulgence, are unwilling to address this cultural crisis and have become more the source of escalating problems rather than agents of constructive change. A ruthless, divisive mentality has captured American society, exemplified by the widespread, ethically bankrupt, and corrupt financial, corporate, and political systems, which, over decades, have laid the legislative foundation and created the financial incentives and mechanisms that ultimately precipitated the Great Recession. Once again in the long history of Western civilization, a major global economic and military force, emboldened by great wealth and power, has been severely crippled by human frailties of succumbing to temptations of high-risk opportunities, unwise choices motivated by self-destructive aspirations, and embracing faulty and dishonorable values. It is noteworthy that some elements of constructive human behavior and cultural traits, which initially contributed to societal advancement, invariably give way to human abuse and cultural instability and decline. During the genesis and early growth stages, a social order’s wise and efficient investment of wealth, energy, and human resources is essential to initially success. However, socio-economic prosperity often contaminates and degrades human values and priorities, ultimately infecting society with a steadily intensifying, callous mentality of self-serving human exploitation. The ethics and values taught to children in past generations (and the discipline they were expected to follow) have been modified or abandoned today amid the search for socio-economic advantage. By the late twentieth century, there was an evolution in America toward a more intense mentality of individual selfindulgence and loss of compassion for the plight of others, which became the national norm in conducting personal, political, and business affairs. Cultural change is as inevitable as the march of time and tomorrow, with its uncertainties, frustrations, and problems, and waits for no one. Equally inevitable is that maturing nations inherently accumulate higher degrees of complexity, competition, disorder, and conflict, which tend to insidiously diminish the efficiency, effectiveness, and productivity of inherently expanding social, economic, and political processes. Consequently, the daily

competitive struggles of individuals and organizations, whether attempting to acquire the basic needs of survival or to achieve aspirations of vast wealth, power, and status, become more convoluted, stressful, and menacing. To cope with these realities of mere existence and the related accumulation of cultural complexity and disorder, human values and ethics become gradually and subtlety modified, generation by generation. Personal values are adjusted and modified to better coincide with the need to maximize self-enhancing opportunities and individual agendas. However, the by-products of culturally maturing processes may breed a weakening dose of human self-interest and callousness and of class competition and conflict. In a highly prosperous and competitive economic environment, those of lesser means fear being unable to successfully compete for the necessities of life, while the more fortunate aggressively seek to enhance their wealth and status. Accordingly, during the last few decades, a small group of wealthy elite has successfully influenced and manipulated the economic and political systems in America, reducing the political voice and standard of living of the lower and middle class segments of society. America’s cultural environment is accurately portrayed by Will Durant’s characterization of the Roman empire destroying itself from within: “decline lay in her people, her morals, her class struggle.” ¹ Furthermore, “the political causes of decay were rooted in one fact—that increasing despotism destroyed the citizen’s civic sense and dried up statesmanship at its source. Powerless to express his political will except by violence, the Roman lost interest in government and became absorbed in his business, his amusements, his legion, or his individual salvation.” ² The United States joins the list of prominent societies that failed; since the time of ancient Greece, these societies have come to exhibit, in their mature stage, characteristic human shortcomings and symptoms of cultural degradation. Economic and political systems become increasingly dysfunctional, callous, and ineffectual as the wealthy and their political allies strive to protect their sources of wealth and power. Paul Krugman accurately describes America’s political environment: “Billionaires can field armies of lobbyists; they can finance think tanks that put the desired spin on policy issues; they can funnel cash to politicians with sympathetic views… . In reality, we’re more than a bit of an oligarchy, in which a handful of wealthy people dominate.” ³ Unfortunately for some, the strategy continues to work exceedingly well. Krugman also points out, “Around 25 years ago, American business—and the American political system—bought into the idea that greed is good.” ⁴ Greed and excessive wealth inequity have been adopted within American society as acceptable, if not necessary, attributes of competitive, successful capitalism and of accomplished individuals. In 2010, 93 percent of national income gains were absorbed by the wealthiest 1 percent, which currently possesses greater collective wealth than the entire 90 percent of Americans. The six heirs of Sam Walton, founder of Wal-Mart, have accumulated wealth equal to that of the poorest 100 million Americans. ⁵

As will be discussed elsewhere, the American burden of individual taxes, corporate taxes, and tax support provided for health and social services, all relative to GDP, ranks last among the twenty richest countries of the world. Meanwhile, the 2008 report of the Committee Encouraging Corporate Philanthropy, which surveys corporate social responsibility (CSR) contributions, reports that 155 major American companies, of which 69 are among the Fortunate 100, contributed, as a percentage of their corporate revenues, a median total expenditure of only 0.13 percent on CSR support. ⁶ This is a significantly lower percentage than in European countries. David Rothkopf cites Rosabeth Moss Kanter’s book SuperCorp, noting that based on her experience, the primary reasons American corporations pursue CSRs is “to improve the bottom line—either by satisfying a political need, engendering community support, saving money, getting a tax benefit, winning investor support, or some such goal.” ⁶ Shifting Cultural Values and the Pursuit of Wealth Today, the primacy of individual wealth acquisition in America extends from the billion-dollar-a-year hedge fund managers and the multitude of high-sixfigure earners of Wall Street and major corporations to the career aspirations of American high school and college students. In an abrupt departure from the 1960s through the 1980s, the best and brightest college students from elite universities are overwhelmingly dismissing potential careers in math, science, and engineering in favor of more financially rewarding Wall Street and Boston investment firms. Forty percent of the 1,300 graduates of Yale’s class of 1986 applied to First Boston Investment Bank for analyst positions. The principles of economics course at Harvard had forty sections and over a thousand students in 1987, which had tripled in ten years. At the same time, at Princeton, economics became the most popular area of concentration for the first time, as this is considered “a requirement for a job on Wall Street.” ⁷ Young physicians are, on the average, working fewer hours than their predecessors, and the proportion of medical students selecting primary care practice has declined during the last fifteen years, as the differential compensation level compared to more specialized practices has appreciably expanded. According to the Medical Group Management Association, in 2010 primary care physicians averaged about $200,000 annually, while surgery, orthopedic, and radiology practitioners earned twice this figure. ⁸ The annual UCLA survey of key trends among college freshmen reflects an increasing self-focused individualism and materialism within American society. In the late 1960s and early 1970s, 45 to 50 percent of freshman reported as very important personal objectives, keeping current with political events and assisting in the achievement of a healthy environment, as compared with 40 percent citing “being very well off financially.” By 1998, those entering college rated politics and environment at 26 percent and 19 percent, respectively, and financial well-being at 75 percent. A national survey of high school seniors by the University of Michigan found 46 percent of students in 1976 rated “having lots of money” as quite important, compared to 60 to 65 percent in the mid-1990s. Interestingly,

such student self-reported values are consistent with a UCLA survey, which found that between the late 1960s and late 1990s, participation in student elections declined from 75 percent to 30 percent, the inclination to donate to charity declined by 25 percent, and trusting other people declined by 50 percent. When the X’er generation (1965-1981) reached adult status, 54 percent reported feeling guilty for not voting compared to 70 percent among older generations. Also, they expressed less interest in politics, were less knowledgeable of current events, and participated less in public meetings, religious services, community projects, and political causes. ⁹ Such participatory rate declines in social, civic, and political priorities and objectives represent a generational succession phenomenon of shifting values, ethics, and behavior. Tomas Sedlack, in Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street , portrays economics as a cultural phenomenon that inherently encompasses ethics; thus, ultimately economics is about doing good and evil, usually selectively choosing who benefits and who suffers: “We are by far the richest civilization that has ever existed but we are just as far from the word ‘enough’ or from satisfaction, if not further, than at any time in the distinct ‘primitive’ past.” ¹⁰ An infectious societal greed has catalyzed the pursuit of continuous economic growth and aspirations of boundless wealth and consumer consumption, despite the compromise of individual and cultural ethics that is required during the journey to achieve self-oriented goals. ¹¹ In an article entitled “Lawyers and Accountants Once Put Integrity First,” Mark Everson questions whether, in today’s business environment, lawyers and accountants are protecting the integrity of capitalism against corporation misconduct as they did decades ago. In that era, “one’s stature is derived from the respect accorded an independent professional.” His thesis is that investors and regulators can no longer depend on outside professionals, as members of independent firms, “to provide a check on corporate risk-taking… help clients adhere to professional standards and follow the law.” Everson cites a senior tax partner at one of the Big Four accounting firms whose directive for assisting their clients was simply to advise when and how “to ignore a particular set of IRS disclosure rules,” principally those that had minor penalties that “could be absorbed as a cost of doing business.” ¹² The Public Company Accounting Oversight Board reported in 2012 that its review of the audits of twenty-three brokerage firms found that not one was “deemed acceptable.” These firms ranged in size from very small to major public institutions. The board found something wrong in nearly one in six audits among the Big Four: Deloitte & Touche, PriceWaterhouseCoopers, KPMG, and Ernst & Young. Many of the defects were the result of insufficient work performed to justify or validate a conclusion that particular numbers were correct; “firms did not perform sufficient procedures to test the occurrence, accuracy, and completeness of revenue.” ¹³ The percentage of audits found to be deficient among the Big Four increased from 15 percent to 33 percent from 2009 to 2010.

Lynn E. Turner, a former partner in Coopers & Lybrand and a former chief accountant for the Securities and Exchange Commission, stated, “If any other businesses, such a manufacturing or software companies, had such high failure rates in their products, they would go out of business.” As amazing as it appears, such oversight did not exist until the 2002 passage of the Sarbanes-Oxley Act. Up to that time, appraisals were based on a “peer review” process administered by the American Institute of Certified Public Accountants, under which, incredibly, one firm reviewed the work product of another firm. In March 2013, as a follow up to previous findings, the Board reported that PriceWaterhouseCoopers had failed to fully remedy 2009 inadequacies, including “applying an appropriate level of professional skepticism in subjective areas susceptible to management bias.” It also found that the “firm’s system of quality control may in some respects fail to provide sufficient assurance that the firm’s audit work will meet applicable standards and requirements.” ¹³ Legal firms are measured by billing rates, hours generated, and partner earnings. The Wall Street Journal states that at the top law firms, many partners billed rates of $1,000 per hour, and “the underlining principle is if you can get it, get it.” General Electric has received undesired publicity, while making stockholders richer, by being recognized as one of the most progressive corporations in manipulating tax laws and accounting principles; GE established their tax department as a profit center. ¹³ Their success was evident when the company reportedly paid no federal income tax in 2010. During the last half century, the global competitive environment of opportunity for individuals and corporations to acquire unprecedented levels of wealth has been greatly intensified by an enormous expansion of general knowledge, technology, and available investment capital, which has been rapidly transformed into profitable commercial ventures. Additionally, advancements in marketing techniques, in transportation methods, and in communication systems have enormously expanded the products and services available to potential consumers on a global scale. Consequently, the lure of historic levels of new wealth has drastically modified human values; behaviors have been changed, to the point of admiring those in business, finance, and the professions who are clever enough to push the legal and ethical limits of acceptable behavior, in order to increase corporate profits and individual wealth. Major Wall Street investment firms, with access to unlimited investor capital, can afford the world’s most capable lawyers, accountants, financiers, mathematicians, economists, and managers and the most advanced computing equipment, software development, and staff. Thus, one should not be surprised by Wall Street investment and financial manipulations that produce continuous major and minor global breaches of ethics, while establishing new records of company profits and executive compensation. Some may be mystified that the government continues to openly and knowingly assist the financial sector in continuing, decade after decade, to engage in unethical and unlawful practices, which result in enormous financial, emotional, and physical suffering for hundreds of millions of Americans. However, others recognize that enormous corporate

profits are flowing to politicians, who are willing enablers of the nation’s supposedly free enterprise economic system; other results include huge deficiencies in the government’s human and financial resources and an unwillingness to monitor or regulate the financial sector. William Cohan, describing Goldman Sachs’s “charmed 142 years” of existence, notes that the firm has survived many crises, including losing much of its capital “in a scam of its own creation” during the Depression and again in the late 1940s, when it was accused of collusion by the federal government. ¹⁴ Additionally, over the last few decades, charges of insider trading and other forms of trader misconduct have contributed to major financial threats for the firm. The sub-prime home mortgage scheme represents only the latest chapter in Goldman’s history; the firm misled and misrepresented the financial interests of investors in order to generate big profits by creating complex financial instruments that not even regulators can comprehend. Perhaps their most elegant and profitable financial engineering scam to date was “the big short.” Goldman Sachs underwrote billions of dollars of generic mortgage securities for its clients, while another in-house group pursued “well-timed proprietary” bets on the collapse of the housing market. The strategy of betting against the success of the housing market, the big short, was successful in offsetting the firm’s mortgage-related securities losses, producing a $4 billion profit in 2007. Goldman’s net profit for the year was a record $11.4 billion, and the top five executives received compensation totaling $322 million. In 2007, as the nation’s housing market expansion reversed into a contraction, there was a sharp decline in the trillion-dollar market value of derivatives (mortgage-related securities). As a result, hedge fund investors abandoned the market in large numbers, and by July, two Bear Stearns hedge funds were liquidated, with investors losing $1.5 billion (Warren Buffett labeled such derivatives “weapons of mass destruction.” ¹⁵ ). As will be discussed in chapter VIII, massive financial incentives and rewards from the financial industry flowing into the Washington political system ensures that financial legislation will create continuous generations of new financial instruments, such as sub-prime mortgage securities. Such corporate-political alliances and outcomes exemplify the corrupt business and political sectors of American society. The corporate producers of goods and services and those government entities responsible for legislating, monitoring, regulating, and growing the national economy have failed (to their shame) to share their prosperity and social fairness among the rest of the nation’s population, while promoting the theme that greed is economically healthy for America. To the detriment of society, affluent individuals, government officials, and corporations intensely pursue financial success at the expense of professional ethics and a responsibility for society’s long-term socio-economic viability. Irrational Priorities and Failed Governance Despite the prosperity of the last three decades, the nation failed to adequately invest in education, health care, infrastructure, basic research, and social welfare, while establishing record income and accumulated

wealth for the richest citizens. A higher priority was assigned to keeping tax rates low (even though they were already historically low), while propagating the myth that low taxes would stimulate economic growth. In the early 1950s, the federal government spent, relative to GDP, 1.2 percent on infrastructure, compared to only 0.2 percent in 2010, and in 1964 it spent about 2 percent on research and development, compared to 0.9 percent in 2009. ¹⁶ Reducing government spending on such vital budget categories reduces employment and diminishes middle class spending; it also reduces our global economic competitiveness. State spending follows the same irrational pattern. In 2010, the state of California, while deeply in debt, spent $6 billion on personnel for its prison system, compared to only $4.7 billion for thirty-three campuses of its public higher education system (which services 670,000 students). Over the last thirty years, the state’s support for the University of California has declined from 30 percent of its expenditures to 11 percent, as student cost increased from less than $1,000 to over $13,000. ¹⁷ One consequence of reduced state higher education budgets nationally has been the reduction of full-time faculty positions in favor of part time instructors. Over the last few decades, full-time tenure track positions have been reduced to 24 percent of the academic work force. These positions have been replaced by part-time people, who in 2010, on the average, were paid $2,700 per course without benefits, which provided enormous savings for the institutions but which generally shortchanged the student educational experience in and outside the classroom. Since Proposition 13, which limited property tax increases, California’s funding for public education has declined during the last thirty years from one of the most generous to the bottom national quartile. The world-class public education system, no longer affordable for the middle class, has seen its mission suffer while its quality has been severely diminished. Additionally, the freeway system has significantly deteriorated and social services have been greatly reduced. ¹⁸ Christina D. Romer, former chair of President Obama’s Council of Economic Advisors and Professor of Economics at Berkeley, points out that government spending on scientific research, education, and infrastructure increases future productivity; it also has inherent social value. Also, experience demonstrates that if the government doesn’t actively invest in research and development, private investment will lag, a recipe for declining invention, innovation, and productivity. ¹⁹ The lack of compassion and assistance for those disadvantaged by the Great Recession illustrates the degradation of the nation’s moral and social principles, which are fundamental to a democratic society. Materialism, selfserving ideological objectives, and harsh tactics characterize the mood of a large segment of the public, which mirrors the political climate. Historic class divisions, according to the political theorist Michael J. Thompson, are dangerous; they produce “perverted forms of government… . Few ruled over the many and the public good was trampled by the wealthy, powerful, and elite.” Thompson, quoted in Jacob S. Hacker and Paul Pierson’s Winner-TakeAll Politics , says the preservation of democratic practices “required… not a

utopian form of equality but a set of institutions and laws—and hopefully a civic culture as well—that would limit the excesses of wealth and property.” ²⁰ The priorities and legislative efforts exhibited by Congress not only illustrate the irrational nature of governmental ineffectiveness, but also the dominant role of partisan politics in thwarting compromise and accomplishing the people’s business. Consider Robert Frank’s rational analysis of the proposed 2011 House of Representatives’ budget reductions; these cuts affected mostly worthwhile programs and actually added to the deficit rather than reducing it. ¹⁸ Cutting the billion dollars spent on nutritional support for low-income pregnant women, infants, and small children and another billion on training and employment grants to states would produce negative financial effects, rather than reducing the deficit. ²¹ Other areas with proposed reductions include the National Institute of Health’s biomedical research and programs at the Centers for Disease Control and Prevention that deal with prenatal care and preventing preterm births. The Institute of Medicine of the National Academies estimated that, in 2006, premature births minimally cost the nation $26 billion a year and that a 10 percent budget reduction would cost the lives of thousands of infants and $2.6 billion a year. It should be noted that in 2010, the International Monetary Fund (IMF) ranked America’s infant mortality rate as the highest among the thirty-three nations having advanced economies. The data reveal that America’s infant mortality rate has worsened from fifteenth highest in 1960 to thirteenth in 1980, to second in 2000, and to first place in 2010. ²² Cuts made to the Internal Revenue Service’s budget hamper efforts to collect taxes owed the government; this irrational action reduces spending merely to gain political benefits, despite the consequences of losing substantially greater amounts of tax revenue. The administration’s proposed IRS budget increase of $1 billion would enable the hiring of 5,100 additional employees to collect hundreds of billions of dollars unpaid taxes. Instead, Republican leadership successfully reduced the existing IRS budget by $300,000, which necessitated the elimination of 5,400 employees. A 2012 IRS report explained that its workload increased due to the expansion of the 3.8 million-word tax code legislated by Congress. It was also pointed out that the IRS found itself in the middle of Washington’s political tension as a result of its future expanded duties to administer the new health care legislation. Thus, the IRS budget reduction was connected with Republican efforts to sabotage health care legislation by denying appropriations for its legal implementation, which would also reduce tax revenues by hundreds of billions of dollars. Other proposed budget reductions included $648 million from nuclear nonproliferation programming, intended to reduce terrorist threats. ²³ These congressional proposals were offered, in the name of debt reduction, only months after the federal government approved a continuation of the Bush temporary income tax rate reduction for the wealthiest Americans. These tax rates represent the lowest rates for the wealthiest Americans in over fifty years. By ending this reduced tax rate for the nation’s most

wealthy earners, about $3.8 trillion of tax revenue would have been added over the next ten years. ²⁴ The post-1980s has been a textbook case of political drift when “economic dynamism outpaces the capacity of governing institutions… periods in which curbs on economic inequality and market power remain largely off the agenda.” ²⁵ The underlining functions and overlapping authority of the three branches of government, under both formal and informal rules, inherently permit the minority party to stall most proposed major legislation. That is, it is easier and more advantageous for politicians to do nothing rather than to engage in an honest, ethical give-and-take of compromise-oriented politics. While it will not gain points with a cynical public, the best way to stay out of political trouble is to do nothing, ride the drift, and take orders from party leaders. Shortly following the 2010 election, a USA Today-Gallup poll found a 41 percent plurality of Republicans surveyed approved of political leaders sticking to their beliefs, even if little work was accomplished, compared to 18 percent of Democrats. Fifty-nine percent of Democrats supported compromise in order to make progress, compared to 31 percent of Republicans. Additionally, a Wall Street Journal/NBC poll in December 2010 found that 63 percent of Democrats polled supported making “compromises to gain consensus on legislation… even if this means not being able to gain consensus,” compared to 50 percent of Republicans. ²⁶ Lawrence Lessig comments on government ineffectiveness: Government is an embarrassment. It has lost the capacity to make the most essential decisions. And slowly it begins to dawn upon us: a ship that can’t be steered is a ship that will sink. ²⁷ Currently, a politician’s primary pragmatic duties are to maintain the good graces and financial support of major donors and relevant political action groups and to be viewed as a good, loyal soldier by party leadership. It is rare for a Washington politician to speak publicly about an important issue without following, in lock-step fashion, the party’s talking points. Since the 2008 election, the Republican party has been unified by the thought that America’s recovery from the Great Recession will be spurred by lowering taxes and reducing the deficit, while stifling the administration’s attempts to reduce the suffering of the American people, who have been hit the hardest by this recessionary economic period. The primary strategy has been to discredit the administration’s attempts to accomplish meaningful legislation while generally supporting the financial interests of major corporations and other financial benefactors. Mann and Ornstein viewed it this way: In 2009-2010, when the Democrats controlled the House and Senate as well as the White House   .   .   . no Republican votes [were] available for any major legislative initiative, save three Senate Republicans who voted early on for the economic stimulus in return for major concessions for each of them. ²⁸

They continued, “In February 2010, Senator Richard Shelby of Alabama put a blanket hold on all White House nominations for executive positions (over 70) in order to get two earmarks worth tens of billions of dollars fast-tracked for his state.” ²⁹ During the summer of 2011, attempts by Congress to increase the nation’s legal debt-ceiling limit were held hostage by Republicans, who were resistant to efforts to lower our unsustainable national debt and stimulate the economy by a combination of increasing tax revenues and reducing budgetary items (the GOP leadership was only interested in the latter). Most respected economists continue to agree that both actions are necessary, and the real issue is the extent to which each method will grow the economy; these experts differ only in the ratio of budget reductions to revenue increases during the next decade. Meanwhile, members of Congress were astoundingly inept in adhering to the democratic process and creating the necessary legislation to avoid a catastrophic default on the nation’s debt. Many did not appear to comprehend the potential gravity of a national default. This debate continues and is another example where alleged truth and knowledge are forged not by reason, data, and logical arguments but by a political party’s fabrication of self-serving, supposed truth for all to loyally follow, so as to justify policies founded on politically pragmatic ideologies that vary from decade to decade, depending on political opportunism. Consider the 2009 Conrad-Gregg Senate bill, which would create a deficit reduction task force to resolve the nation’s debt problem; this legislation had substantial bipartisan support, including Republican leaders John McCain and Mitch McConnell. In January 2010, a vote on the proposal was blocked by a Republican filibuster, which included the votes of McCain and McConnell. McCain and six other Republican cosponsors blocked the bill from being debated. Not coincidentally, President Obama had also expressed support for the bill, and that support has been attributed to the GOP’s reversal of its position. Fred Hiatt, opinion editor for the Washington Post, commented on McConnell’s reversal: “No single vote by any single senator should possibly illustrate everything that is wrong with Washington today. No single vote could embody the full cynicism and cowardice of our political elite at its worst, or explain by itself why problems do not get solved. But here’s one that comes close.” ³⁰ In 1980, Lester Thurow’s book The Zero-Sum Society addressed the economic stagflation of that period, but his thesis is more generally applicable to times of economic austerity, including the nation’s postrecessionary times. The message is that nations approach solutions to problems of economic adversity with a zero-sum mentality: there must be a loser for each winner. The rational, nonpartisan appropriation of expenditures or “loss allocation [is] precisely what our political process is least capable of doing. When there are economic gains to be allocated, our political process can allocate them. When there are large economic losses to be allocated, our political process is paralyzed.” ³¹ Thurow’s zero-sum mentality appropriately describes current American politics, exemplified by legislative paralysis in Congress and the Republican insistence on reducing

social safety net and public education funding, not funding the administration’s job-creating national infrastructure initiatives, but keeping Defense Department spending high. That is, the GOP has “proved ready and willing to allocate losses, as long as the losses were imposed on others— ideally on Democratic constituencies.” ³² US Health Care: Partisan Politics, Bad Economics, and Anti-Altruistic Values Obamacare offers an impressive example of how congressional Republicans continue to follow the Newt Gingrich strategy of unanimously, emphatically, and hostilely opposing any political idea or legislative effort that might contribute favorably to the opposition’s perceived success, even if a major legislative initiative was consistent with long-held party philosophies and objectives. Michael Lofgren, veteran Republican congressional staffer, commented that “the Republican party is becoming less and less like a traditional political party in a representative democracy and becoming more like an apocalyptic cult, or one of the intensely ideological authoritarian parties of twentieth-century Europe.” ³³ J. D. Kleinke, in a New York Times Op-Ed piece entitled “The Conservative Case for Obamacare,” comments “buried beneath two and a half years of Republican political condemnations, the architecture of the Affordable Care Act is based on conservative, not liberal, ideas about individual responsibility and the power to market forces.” ³⁴ Accordingly, the act provides for the system to function as a competitive marketplace, including the removal of such competitive obstacles as tens of millions of people potentially gaming the system and ignoring their financial responsibility for their own health care by relying on a subsidy from others and seeking “free care” in emergency rooms. “The mandate is about personal responsibility—a hallmark of conservative thought” and “an idea forged not by liberal social engineers at the Brookings Institution but by conservative economists at the Heritage Foundation.” Additionally, the GOP is now opposed to the concept of health insurance exchanges, which had been on the agenda of Republican governors and legislators for many years, even though it fosters a promarket mechanism to maximize buyer and seller opportunities and choices, standardizes products, and provides pricing transparency and accountability. Thus, “with transparency, mobility, and choice of exchanges, business and individuals can decide for themselves which insurers deserve their dollars.” Kleinke concludes, “Clear away all the demagogy and the scare tactics and Obamacare is, at its core, Romneycare across state lines. This strategy of preventing implementation of the Act has already denied millions of citizens their legal rights to health care benefits for which they are entitled.” Over the last half century, Americans have been perplexed by the nation’s high cost of medical care and the inability to secure adequate care for all citizens, a system comparable to that of other developed nations. The average per capita cost for health care in the United States exceeds $8,000 per year, or twice the amount of most European nations, which are able to provide health care systems for all citizens, with care rated superior to that

of America’s non-system. According to the Congressional Budget Office (CBO), the next decade could see increasing costs of US health care expenditures for Social Security, interest of the public debt, defense, and health care; these expenditures could exceed tax revenues, thus posing a dilemma for the political establishment. Victor Fuchs, emeritus professor of economics and health research and policy at Stanford University, states, “If we solve our health care spending, practically all of our fiscal problems go away.” ³⁵ He addresses why health care in the United States is so costly compared to European nations. First, a greater US bureaucracy results in higher administrative costs, particularly the billing and reimbursement systems. Second, there is a 2-to-1 specialist to primary care physician ratio, compared to the 1-to-1 ratio in other countries. Third, there is an inefficient use of equipment in the United States; for example, there are 4.2 times as many MRI scanners relative to population in America than in Canada. Fourth, the United States provides less social support for the poor, which results in less timely care and ultimately more money being spent for acute and chronic illnesses and diseases. Fifth, physician incomes and drug prices are higher so as to provide for wealthier physicians, stockholders, and executives. American society is also excessively generous in providing greater financial rewards and significantly lower taxes for doctors, lawyers, financiers, and major corporate CEOs functioning within the health care industry. When an industry, such as the health industry, acquires monopolistic power, excessive profits essentially become a transfer of wealth from the low—and middle-income sectors of the population to the wealthiest members of society. This phenomenon is seen in health insurance companies and the drug industry; it inflates per capita health expenditures and is partially responsible for the high cost of US health care relative to other members of the developed industrial nations. But, more broadly, in the United States, those capable of generating substantial revenues from athletics and entertainers to medical professionals and hedge fund managers receive significantly higher levels of compensations and pay lower taxes as a percentage of earnings than in the world’s twenty richest nations. At the same time, America’s national wealth has been deemed insufficient to provide quality health care for about forty to fifty million Americans. Comparing the compensation of American physicians and the frequency and the cost of expensive testing with those of other European nations essentially explains the high cost of US health care and why a large segment of the population does not receive adequate care. But significant reductions in health care cost should not be expected from within such a system, where such changes would require stakeholders to accept income reductions. Steven Brill follows the money trail: Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who

don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills. ³⁶ The intensity of the passionate opposition to “Obamacare” since its passage reveals a fundamental defect in American society; human compassion and altruism have become rare commodities. The context for those opposing universal health care for all citizens includes an America’s infant mortality rate higher than thirty-three nations among the most advanced economies and, according to a World Health Organization report, all twelve of the most industrial developed countries possessing superior health care systems. ²² Additionally, the United States has the lowest life expectancy of the twenty wealthiest nations. A 2012 study by Harvard University’s School of Public Health analyzed data from three states, which expanded their Medicaid programs during the last decade to include low-income adults not normally eligible for Medicaid. ³⁷ The number of deaths for people in the age group twenty to sixty-four decreased by 1,500 people per year. These program expansions were associated with a decline of 6.1 percent in the death rate or 2,840 per year for every 500,000 included. The three-state expanded Medicaid experiment represents a proposed national program, which is part of the Affordable Care Act, scheduled for implementation in 2014. However, in 2012, the Supreme Court ruled that under the Affordable Care Act, states had the option but were not required to expand or reject the Medicaid provision, which was expected to cover seventeen million additional people. Consequently, some governors, for obvious political reasons, vow to block expansion of their state’s opportunity to join the 2014 state Medicaid program and reject federal funds. By the summer of 2013, about half of the states had refused so far to expand their Medicaid programs, thus leaving millions of the nation’s poorest people ineligible for government-subsidized health insurance under the Obamacare provisions. More that half of the nation’s citizens without health insurance reside in these states, which include Texas, Florida, Kansas, Alabama, Louisiana, Mississippi, and Georgia. Those with annual incomes between $11,490 and $45,960 are eligible for federal tax credits as a subsidy to purchase private health insurance. Thus, individuals below the minimum annual income are without tax credits, Medicaid, or other assistance to acquire health insurance coverage. The Congressional Budget Office estimates that 25 million persons will obtain coverage under the new health care law but the Urban Institute contends that about 5.7 million adults with incomes below the poverty line in states not expanding their Medicaid programs will be denied coverage. The executive director of Texas Impact, an interfaith group favoring Medicaid expansion, said: “A lot of people will come in, file applications and find they are not eligible for help because they are too poor. We will have to tell them, ‘If only you had a little more money, you could get insurance subsidies, but because you are so poor, you cannot get anything.’ That’s an odd message, a very strange message.” ³⁷

The obvious question is why would about half of Americans, citizens of the world’s richest nation, oppose bringing vital health care and thus more satisfying and longer lives to so many of its citizens? Other contextual elements of importance to this question are that the Medicare system of universal health care for all persons over sixty-five is evaluated by seniors as extremely effective and is more cost effective than private insurers. Also, the Veterans Administration health care system receives equally high approval rating from veterans and is highly cost effective. When queried about their opposition to the Affordable Health Care Act, a typical response from citizens is that they have been told that the nation cannot afford it, as the nation already has unsustainable debt. Further probing will often elicit the fear of people losing what they have and being unwilling to risk their benefits by helping others in need. This rationale is another version of today’s often-heard argument for retaining all of one’s earned income and objecting to taxes at any level and to public assistance in general: “I got mine and I want to keep it, you get your own.” That is, an adult version of the young child’s response to the idea of sharing toys at playtime. A final and most important element of context in the consideration that unaffordability prevents guaranteeing universal health care for all Americans is that from 1965 to 2009, twenty-one of the world’s richest nations devoted a larger percentage of their national productivity to taxes as well as to public social spending than did the United States (details are provided in chapter IV). However, affordability is a relative term and associated with one’s values and priorities. Accordingly, one may conclude that a prevailing sense of greed dominates a large segment of the American population, which supports the lowest taxes and lowest spending on health and social problems relative to national wealth among the world’s twenty richest nations, while denying adequate health care to infants and millions of other Americans. The health care issue exemplifies the fundamental problem facing the nation: our core values have become defective; our lack of ethics, our egocentric attitudes, and our self-serving behavior has disenfranchised millions of citizens from access to the health care that is available to the majority of Americans. Princeton University’s Paul Krugman, a Nobel Laureate in economics, states as the “key message” of his book, The Conscience of a Liberal , that “the legacy of slavery, America’s original sin, is the reason we’re the only advanced economy that doesn’t guarantee health care to our citizens. White backlash against the civil rights movement is the reason America is the only advanced country where a major political party wants to roll back the welfare state.” ³⁷ He notes that progressive taxation and the welfare state is not a recent event in modern history. Germany’s Otto von Bismarck in the 1880s “introduced old-age pensions, unemployment insurance, and even national health insurance.” ³⁸ The “backlash” that Krugman refers to is the rapid and almost universal transition of the Deep South’s Democratic party membership and its

conservative southern culture to the Republican party, as a result of the Civil Rights and Voters Rights Acts. Both the membership and far right agenda of the 1950s southern Democratic party has been incorporated within the new post-1980s Republicanism. This is the subject of chapter VII. The continuing, contentious debate over universal health care has disingenuously focused on current Republican party conservative political ideology as opposed to its past moderate position championed by the party. Central to the opposition of government-sponsored health care is the goal of relying on the private sector and enhancing corporate profits. This is another contributing factor to the polarization of political party leaders, the general public, and cultural values, which constitutes a major moral issue for the nation. In the spirit of achieving the public good, other industrialized nations have achieved universal health care, utilizing various political and economic philosophies and health care models, whose financial solvency is guaranteed by government. However, the financial interests and lobbying efforts of the medical and health care industries have frustrated efforts of both parties for seven decades to provide adequate health care for all Americans. In 2011, over 3,100 lobbyists represented the health industry, six lobbyists for each member of congress, which constituted only one lobbying segment of the year’s lobbying effort that was estimated to cost $3.2 billion. ³⁹ When an industry acquires such monopolistic political power, excessive profits are inevitable and, in this case, inflate per capita health expenditures and contribute to the high cost of US health care relative to other members of the developed industrial nations. Interestingly, America’s decades-long debates regarding universal health insurance have seldom, if ever, benefited from sound, fundamental evidence as to whether poor people, if provided adequate medical insurance, would achieve improved long-term physical and mental health and greater financial stability. Instead, polarizing ideological arguments of non-affordability versus a moral imperative to create a just society and provide universal health care have dominated stagnant political opinions and discussions for half a century. To address this issue, a state of Oregon research study randomly assigned poor people to receive either Medicaid benefits or no benefits and then assessed the health, happiness, and financial responsibility of both groups. ⁴⁰ The fundamental question is whether the social and economic character of American society is best served in the long run by spending more on health care for those who cannot afford it or by simply continuing to offer an assumed cheaper “safety net” of people relying on emergency rooms, free clinics, charity care, no care, or just not paying their medical bills. The study, published by the National Bureau of Economic Research, reported the following: • The insured group had 25 percent greater medical expenditures than the uninsured. • Women with insurance were 60 percent more likely to have mammograms.

• Those with insurance were 20 percent more likely to have cholesterol checks, 70 percent more likely to have a specific medical facility to rely on, and 50 percent more likely to have a specific doctor. • Of the insured group, 25 percent assessed their health as good to excellent and 40 percent were less likely to say their health had worsened. • Those with insurance were 25 percent less likely to have an unpaid bill sent to a collection agency and were 40 percent less likely to borrow money or fail to pay other bills because they had to pay medical bills. Dr. Katherine Baicker, professor of health economics at Harvard School of Public Health and co-principle investigator of the study, said, “Being uninsured is incredibly stressful from a financial perspective, a psychological perspective, a physical perspective. It is a huge relief to people not to have to worry about it day in and day out.” ⁴⁰ Dr. Amy Finkelstein, professor of economics at MIT and the other co-principle investigator, was interested to see if Medicaid would be viewed as analogous to other forms of insurance, protecting them from financial catastrophe. One might conclude that such findings are not surprising. People who have guaranteed health insurance will obviously feel more secure and content with their station in life when family members have a positive prospect for being healthier and happier, living longer, and being more able to successfully pursue their ambitions. Likewise, families who insure their homes, cars, and the lives of family breadwinners are more financially secure, stress free, and emotionally attuned to contribute to society. Health Care’s “Outrageous Pricing and Egregious Profits” Steven Brill’s extensive Time magazine article of March 4, 2013, “Bitter Pill: How Outrageous Pricing and Egregious Profits Are Destroying Our Health Care,” is a compelling condemnation, not only of the health care industry but also of government’s lack of responsibility and accountability to the public for a system of fair and affordable health care. ³⁶ The article portrays a rapidly advancing, technologically enhanced medical culture evolving into the same politically enabled monolithic corporate model and engaging in the same skullduggery of the financial and manufacturing sectors of the economy. This culture joins the other well-established elite Big Money sectors in contributing further to destabilizing the middle class economy and the economic plight of a majority of citizens whose incomes have stagnated for over three decades. Appropriately, Brill focuses on the industry’s abuses in pricing and its brazen greed rather than on the current worn-out political debate of government versus the private sector as the appropriate provider of health insurance coverage. His critical question is: Why is the US medical cost per person the highest among the developed nations? It is estimated that in 2013, the United States will spend about $2.8 trillion on health care, which is $750 billion, or 27 percent, more than would be required based on per capita expenditures of other developed nations.

In considering this excessive expenditure, it is noteworthy that in 2012 Medicare processed more than a billion claims a year, totaling about $550 billion, at an administrative and processing cost of $3.8 billion, which corresponds to $3.80 per claim. This cost represents 0.6 percent of the $3.8 billion in claims processed. Based on health insurance provider Aetna Inc.’s data filed with the Security and Exchange Committee (SEC), their cost for processing, accounting, sales, and executive management was $6.9 billion for 229 million claims that paid out $23.7 billion, or about $30 per claim. This cost represents 29 percent of the $6.9 billion of claims processed. Thus, it would appear that Medicare’s administration is quite cost efficient and, in fact, more so than the private sector, whose emphasis is producing a profit. The centerpiece of the Brill analysis is the correlation of real patient hospital bills to the “hospital chargemaster,” a comprehensive, semisecret list of billable rates charged to a patient or a patient’s health care provider. Importantly, these rates are widely accepted as highly inflated charges, many times the actual hospital cost. The chargemaster rates typically serve as the starting point for bargaining with patients and health insurance providers as to what will ultimately be owed and paid to the hospital. Unfortunately, few patients are aware of this bargaining option, as hospitals do not advertise its financial strategies or, in some cases, will not admit it. As one medical center CEO said on being asked to discuss billing practices, “The law does not allow us to talk about how we bill.” The chargemaster is the central mechanism of the revenue cycle for a hospital and is designed to maximize profits by overcharging patients whenever possible, with individuals without health insurance (i.e., approximately 50 million uninsured Americans) being the most vulnerable. Negotiating discounts from chargemaster rates are directly proportional to a particular insurance company’s volume of business, which may provide the leverage for larger insurers to negotiate reductions of 30 to 50 percent. Medicare receives the deepest discounts. However, individuals without health insurance are subjected to the full chargemaster rates, even by nonprofit hospitals, which generate operational profits that would be the envy of private corporations. Based on its latest SEC filings for 2010, Stamford Hospital, an official nonprofit Connecticut institution, listed expenses for laboratory work of $27.5 million, but charged $293.2 million, over ten times its costs. As a prescription example, nonprofit hospitals typically mark up the cancer wonder drug Rituxan by 400 percent but may respond to requests to “negotiate.” Brill reports that it cost Biogen Idec about $300 to make, test, package, and ship Rituxan, for which it charges MD Anderson $3,000 to $3,500 and for which the hospital’s rate is $13,702. There exists considerable room to negotiate and still contribute to an operational profit. While many Americans have been exposed to such medical billing, pricing, and negotiation, many without health insurance, which overwhelming represent the lower socio-economic segment of society, are unaware of the option or are incapable of directly taking on hospital administrators. According to its 2010 tax returns, Montefiore Medical Center, a large nonprofit New York City hospital, collected $2.56 billion in revenue, 99.4

percent from patients and 0.6 percent from charitable sources. Its operating profit was $196.8 million, and its executive salaries included the CEO at $4.1 million, the CFO at $3.2 million, the executive VP at $2.2 million, and the head of the dental department at $1.8 million. Mercy Hospital, associated with the Catholic Church and consisting of 31 hospitals and 300 clinics in the Midwest, collected revenues of $4.28 billion during its fiscal year ending in June 2011 and paid the parent company CEO and executive VP a total of $5.6 million in salaries. An Ernst & Young audit reported that the 3.5 percent of revenue attributed to charity care was based on charges at chargemaster rates and not on actual costs to the provider, which has been estimated at 0.3 percent, or about $13 million of the $4.28 billion in revenue. A joint effort by Bank of America and McKinsey & Co. reports that the 2,900 US nonprofit hospitals, exempt from income taxes, average higher operating profits than the 1,000 for-profit hospitals. “In health care, being nonprofit produces more profit.” In its 2011 fiscal year, Stamford Hospital had an operating profit of $63 million, based on actual revenue of $495 million, or a 12.7 percent profit margin, while paying its CEO $1.86 million. The 12.7 percent figure was about the same as the 11.7 percent national average for nonprofit hospitals. Brill says that the nation’s health care system is the “ultimate seller’s market… a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to computed tomography (CT) scans to hospital bill-coding and collection services.” He reports that from Stamford Hospital to the most prominent providers such as SloanKettering and MD Anderson Cancer Center, “nonprofit institutions have morphed into high-profit, high-profile businesses that have the best of both worlds… low-risk, must-have public utilities that nonetheless pay their operators as if they were high-risk entrepreneurs… the nonprofit profit makers.” According to a McKinsey study, the average hospital profit margins are 15 percent for emergency care, 35 percent for non-emergency outpatient care, and 2 percent for inpatient care. It is estimated that outpatient services constitute the source of two-thirds of the $750 billion annual US overspending identified by McKinsey. On the political front, the American Hospital Association lobby group in Washington, urging Congress not to reduce hospital payments, relies on the argument of the potential loss of “$39.3 billion,” which currently provides care for the poor. However, this figure is based on the grossly inflate chargemaster rates, which actually corresponds to less than $3 billion, or half a percent of annual hospital revenues, after adjusted for bad debts. Excessive medical testing is another element of excess cost. X-ray CT tests per capita in the United States are 71 percent more frequent than in Germany, where government monitoring eliminates incentives for excessive testing. Medicare reimburses hospitals about four times the amount for CT scans as in Germany. In 1997, there were fewer than 3,000 US CT and MRI scanners in operation, which were utilized for about 3,800 scans per day; by

2006, more than 10,000 machines performed about 6,100 scans per day. Financial incentives and avoidance of legal problems are attributed to this expansion of medical costs. One hospital CEO stated, “We use the CT scan because it’s a great defense… if anyone has fallen or done anything around their head—hell, if they even say the word ‘head’—we do it to be safe. We can’t be sued for doing too much.” The US consumer price for prescription drugs is another area of excessive cost. It is projected that in 2013, the United States will spend $280 billion on prescription drugs, but if we were to pay the same prices that exist in other developed countries, we would save about $94 billion. According to SEC filings of major drug companies, research and development costs are only in the 15 to 20 percent range of their gross revenues. Interestingly, Congress has prohibited Medicare from negotiating prescription drug prices, instead mandating a market average sale price plus 6 percent. Additionally, Medicare must not be associated with any efforts to determine the comparative effectiveness of prescription drugs. Thus, the topic of which drugs are more or less effective or cheaper is of great interest to the consumer. But if government was assigned this role it could, and most probably would, mean a reduction of company profits in favor of consumer savings. In reality, Big Money, in this case Big Pharma, has won again over the public’s interests. United Republic, a campaign finance organization with a mission of reducing the influence of money in politics, reports that $116 million was spent on lobbying activities by the prescription drug industry to prohibit Medicare from seeking the lowest drug prices on the open market. The annual return on this political investment is estimated to be $90 billion, a 77,500 percent return. ⁴¹ Brill’s analysis of Medicare patient bills indisputably exposes the deep discounting of chargemaster rates and the extent of hospital “Outrageous Pricing and Egregious Profits.” A woman who fell and broke her wrist accumulated a $121,414 chargemaster-based bill, which became only a $16,949 for Medicare bill. A $51,445 bill for a three-day hospital stay for a dying ninety-one-year-old patient became $19,242. Only patients under sixty-five without health insurance are expected to pay these inflated chargemaster rates. That is, those most unable to afford such overpriced health care are saddled with the highest costs of the innovative, high-profit “chargemaster strategy” for physician care, hospital costs, prescriptions, and dental and vision needs. Not surprisingly, 60 percent of personal bankruptcy filings in the United States are due to medical bills, a fear that doesn’t exist in other developed nations. Thus, the peril of a family losing its home extends beyond the immorality of Wall Street home mortgage scams to include the immorality of the health care profession’s less elegant chargemaster rip-off. However, as outrageous and egregious as these health care pricing and profits are, they are absent from the active agenda of both political parties, which find it politically expedient to focus attention on whether America can afford to provide quality health for all citizens. Meanwhile, the current major financial stockholders in the nation’s health care system become very wealthy, while many suffer greatly. Brill claims, “Hospitals may be the most

politically powerful institution in any congressional district,” and politicians need the votes and the financial support of Big Money to survive. Another element of wasteful spending for health care is the significant overuse and misuse of hospital emergency department facilities, which the New England Healthcare Institute estimates ⁴² “is responsible for up to $38 billion in wasteful spending in the United States every year.” The Leonard Davis Institute of Health Economics provides an insight into this problem. A 2005 study found that more than half of primary care practices were unable to see patients needing urgent care on weekends, and the percentage has continued to increase. It reports that estimates of avoidable emergency department visits “range as high as 56 percent of all visits.” Additionally, and contrary to popular judgments, middle class patients who are unable to be seen by their personal physicians constitute the largest increase in the use of hospital emergency departments for routine problems, not poor people without insurance or a personal physician. The California Health-Care Foundation reports that 46 percent of insured patients visiting emergency departments could have been adequately served by their primary care physician, but two-thirds of the patients reported they were unable to obtain assistance elsewhere. A University of California study, which examined the ten most common outpatient issues treated by hospital emergency departments, found the following ranges of costs: sprain and strains ranged from $4 to $24,110, headaches from $15 to $17,797, kidney stones from $128 to $39,408, and urinary tract infections from $50 to $73,002. Environmental Policy in an Era of Excessive Greed The political power and influence of money to paralyze important federal government regulatory actions is illustrated by Congress’s unwillingness to rationally consider and take action on perhaps the greatest long-term global disaster-in-waiting, the issue of accumulating carbon emissions from the world’s industrial activity. Clearly, taking climate change seriously would require curtailing and modifying current industrial production processes and practices, increasing government regulation and monitoring, and adopting new energy alternatives and efficiencies, which would increase the cost of doing business. The predominant US corporate strategy of short-term, maximum profits shuns any avoidable major expenses and government intrusion wherever and whenever possible. Thus, an abundance of corporate money has been provided for a massive campaign to stifle serious national, and more particularly congressional, discussions and to fund self-serving anti-climate change promotional advertising. This self-serving corporate mentality is a parallel to the ethics of the tobacco industry efforts to hide their own research that established the lethal health risks of smoking, while pursuing marketing campaigns to encourage chemical and psychological addiction and youth to take up smoking. Climate change has been portrayed as “bad science” or “just a theory” so to avoid potential expensive production costs, loss of market share by the various energy sectors, and government regulation. The potential threat of “lost jobs” is the overwhelming political argument that politicians from both

parties use to avoid public discussion of the pros and cons and to suggest potential compromises. A 2010 report, “America’s Climate Choices,” ordered by Congress and conducted by the National Research Council of the National Academy of Sciences, reports that global warming is a real phenomenon and that a strong national policy to limit emissions of heat-trapping gases is necessary. The authors, who include climate scientists, businessmen, and politicians, found that scientific evidence supports climate change forecasts and poses a severe, increasing risk for future generations. The chairman of the panel stated that he hoped the diversity of membership and their lack of “prior bias” would assist in educating skeptical policy makers. Paul W. Bledsoe, a senior advisor with the Bipartisan Policy Center, noted, “This is the classic problem—the divide between scientific reality and political courage” ⁴³ Despite scientific evidence of far reaching global changes in climate and escalating carbon emissions accumulating in the atmosphere, the usual political issues have prevented Congress from addressing the problem. Some nonpolitical policy thinkers have proposed that national emissions standards be established with excessive emissions being subject to a carbon tax, intended to stimulate general energy efficiency initiatives and the development of low-carbon emitting technologies in the private sector. However, given the effectiveness of Washington lobbyists, the chances of passing legislation to tax excessive energy consumption continues to be remote, as such proposals are considered as major threats to economic growth. The bottom line is that such potential legislation is equated to the reality of reducing corporate profits. Accordingly, the coal and oil industries, assisted by the American Chamber of Commerce and various other business interest groups, have funded programs of disinformation, including fake scandals, biased think-tank studies, and anti-environmental political action organizations. Exxon, Mobil, and Koch Industries have spent tens of millions of dollars to fight such legislation. Historically, abusing the environment to support corporate profitability has not been a serious consideration in Congress, unless a local environmental issue could affect one’s re-election possibilities. Thus, the validity of the science of climate change and the wisdom of reducing carbon emissions are not politically viable legislative agenda items. In this case truth is often created by the politics, which just follows the money trail. John Kenneth Galbraith commented, “Out of the pecuniary and political pressures and fashions of the time, economics and larger economic and political systems cultivate their own version of truth.” ⁴⁴

More generally, powerful and wealthy interests vigorously oppose government regulation of business and the environment as well as higher tax rates for business, which would reduce corporate profitability and the personal income of affluent Americans. Immediately after the Gulf of Mexico oil spill disaster, corporate political donations increased to reduce the regulatory power of the Environmental Protection Agency (EPA). Also, legislative initiatives were introduced to strip funding from the IRS to reduce the government’s capability to maximize collection of offshore banking and corporate offices of American companies created to hide profits. Paul Krugman comments: The lesions of the 2008 financial crisis have been forgotten. And the very ideas that got us into the crisis—regulation is always bad, what’s good for the bankers is good for America, tax cuts are the universal elixir—have regained their hold. And now trickle-down economics—specifically, the idea that anything that increases corporate profits is good for economy—is making a comeback. ⁴⁵ Energy companies have been successful in blocking regulation of their particular industries and in restricting energy policies that would significantly broaden and strengthen the nation’s array of available energy sources. The inability of the US government and business to forge constructive long-range strategies that would reduce the nation’s dependence on oil, reduce greenhouse gases, and promote new technologies for a low-carbon economy is in stark contrast to Denmark’s remarkable success. After the 1973 Arab oil embargo, Denmark, which was totally dependent on Middle East oil, adopted the objective of not only becoming more energy secure but in developing new energy oriented businesses. The Environmental and Energy Study Institute, a nonpartisan research center, and the Embassy of Denmark report, “Since 1990, Denmark has reduced its greenhouse gas emissions by 14 percent. Over the same time frame, Danish energy consumption has stayed constant and Denmark’s gross domestic product has grown by more than 40 percent. Denmark is the most energy efficient country in the E.U. due to carbon pricing through energy taxes, carbon taxes, the ‘cap and trade’ system, strict building codes and energy labeling programs. Renewable resources currently supply almost 30 percent of Denmark’s electricity. Wind power is the largest source of renewable electricity, followed by biomass… Today, Copenhagen puts only 3 percent of its waste into landfills and incinerates 39 percent to generate electricity for thousands of households.” ⁴⁶ The United States is no longer able to create, embrace, and accomplish such progressive and far-reaching national objectives and specific goals as it could half a century ago as the public good has been displaced by the power of Big Money. Note that Denmark’s impressive accomplishments were financed by revenues from carbon tax policies, a concept that violates sacred political positions of the US Chamber of Commerce, Grover Norquist’s Taxpayer Protection Pledge of no new taxes signed by over two hundred members of Congress, and a multitude of corporations, small businesses, lobbyist, and large donors.

In Denmark, energy taxes “have stimulated innovation in green power and then recycled the tax revenues back to industry and consumers.” ⁴⁶ As a result, consumers are then able to afford the latest clean technologies while industry receives funding for the development of further technological advancements, which stimulates innovation and competition and creates a rational, healthy free market economy. This strategy illustrates how industry and government can work together for the common good when a society, through its elected officials meets its inherent responsibility to maintain a healthy balance between regulating, monitoring, investing and a healthy free market economy and stable social order. Big Money Financing Politics: A Gift Economy of Influence The strategy of avoidance of critical national issues has come to represent the accepted political behavior of members of Congress, based on the fear of alienating home constituents and losing corporate endorsements and financial support and sponsorships of wealthy donors and advocacy groups. These are significantly more important than finding solutions to the nation’s important problems. Accordingly, the Washington lobbying fraternity has been extremely effective in representing the best interests of business and their executives and in providing abundant funding for those politicians with whom they have a good working relationship. The combined political strength of corporate in-house lobbing staffs, their contracted lobbing firms, and their special interest professional organizations such as the US Chamber of Commerce, has become the dominant power in US politics. In 2009, the Chamber increased its lobbying activities by 60 percent from the previous year, spending an officially reported $144 million, including a quarterly record of $79 million for a single lobbying organization. They opposed major legislation on health care, financial regulation, climate change, and phasing out the Bush cuts for the wealthy. ⁴⁷ However, abundant financial support of the economy of influence is the ultimate enabler of favorable legislation for the money class. The most active and successful capitalist would be expected to resist government involvement to regulate the economy… unless failure is imminent! Also, abundant resources will be used to oppose regulation. The level of a businessperson’s influence in the economy usually parallels the degree of influence in politics. ⁴⁸ Given America’s “time of troubles,” one may ponder the role and responsibilities of the nation’s major corporate leaders to bridge the huge gulf between the two political parties in such times of crisis and return the federal government to a functional entity. Where are the most able and influential American leaders, who should see the urgency of addressing the nation’s unsustainable spending and public debt, historic income inequality, the need for additional government revenue, and creating a national initiatives to remedy a failing system of public education, deteriorating infrastructure, and inadequate, inhuman health and social services? They are busy counting their money. The Business Roundtable, whose membership consists of an array of America’s most prominent and influential citizens, is a self-described “moderate big-business lobbying group.” The objectives of the organization would appear narrowly focused on business profits. The Roundtable actually

lobbies for higher deficits, corporate tax loopholes, lower corporate tax rates, permanent extension of the Bush tax cuts, and opposes reduction in the tax subsidy for health insurance that is part of the health reform bill. The group also supports increased spending for the nation’s deteriorating infrastructure, thus lobbies for legislation that would increase both federal spending and debt while supporting the continuation of low corporate and individual tax rates and loopholes, which reduces tax revenues. The Center for Responsive Politics reports that spending on lobbying activities increased from $1.4 billion in 1998 to $3.5 billion in 2009, which does not include additional hidden activities. During the 1970s, about 3 percent of former congressmen went to work as lobbyist but by 2009 this figure increased to 30 percent. Between 1998 and 2004, more than 2,200 former federal employees and 200 former members of Congress were registered lobbyists. In recent years, ambitious young politicians have come to view becoming a member of Congress or a staff member as a prerequisite, an education, and a necessary temporary stopover for the journey to the ultimate career as a well-paid lobbyist. In 2011, a Census data report showed that seven of the ten richest counties in America were in the Washington DC area, possessing higher median incomes than every other county in the nation. This was not the direct result of government employment but the expanding numbers of lobbyist and the lawyers, contractors, and consultants involved in advising, influencing, and carrying out the federal government’s work. The nation’s capital and surrounding counties are now wealthier than the country’s manufacturing, technological, and financial centers. “When you look around the richest precincts of today’s Washington, your don’t see a city running on paternalism or dependency. You see a city running on exploitation.” ⁴⁹ Why does donated money mean so much to members of Congress? The average congressional cost of re-election during the period from 1974 to 2008 increased from $56,000 to over $1.3 million. In 1974, the total amount for all House and Senate candidates was $77 million, which increased to $343 million in 1982 and to $1.8 billion in 2010. ⁵⁰ These increasingly high priced elections are made affordable by a modernized, legal version of a former illegal, corrupt practice of providing cash to office holders by those seeking political favors for particular legislative initiatives or other government matters. This obsolete exchange economy has been updated to the gift economy , whereby relationship-based economics provides gifts in the form of money to politicians that may, over time, produce a harmony of political thought between lobbyist and politician on important government matters, which may have common long-term benefits. Lobbyists and political action committees (PACs) have huge financial resources and professional staffs to assist politicians in the creation and promotion of legislation and in obtaining broad based assistance with future re-election campaigns and with post-political career opportunities. Thus, the lobby industry provides an attractive, complete career planning service at no financial cost; it is a gift. Such relationships among individual and corporate big donors, lobbyists, and politicians are based on coming to know, trust, and depend on each other.

Lawrence Lessig describes the gift economy “as a series of exchanges between two or more souls who never pretend to equate one exchange to another, but who also don’t pretend that reciprocating is unimportant—an economy in the sense that it marks repeated interactions over time… relationships, not cash, are the currency within these economies.” ⁵¹ Or, as Robert Reich notes modern lobbying “does not necessarily buy a politician’s vote. It buys his mind.” ⁵² Today, gift economy campaign contributions do not purchase a given vote or favor as in the exchange economy of the old days, the cultivation of relationships over time, nourished by cash, only promotes and cements relationships. Advancements in lobbying techniques have progressed from illegal political bribery of past generations to the current legal, but unethical, gift economy, which is much more effective for clients and more lucrative for lobbyist and politicians. Big Money’s investments in lobbying activities normally involve rather simplistic stealth strategies and tactics that, by their very nature, seldom become revealed to the public but have proven to be outrageously profitable. First, lobbyists quickly capitalize on random, unpredictable events and opportunities that emerge during typical political processes. Often, assistance takes the form of quickly creating last minute, unrelated amendments to bills to assist friendly, like-minded legislators in their legislative duties. Second, only a very small percentage of lobbying efforts need be successful for a given corporation to realize a sizeable return on its investment. Small, infrequent, and innocuous victories have big payoffs. Third, surreptitiously impeding or blocking a legislative initiative often accomplishes the objective; a rather simple task, given numerous required complex processes and many individuals involved in advancing a bill. Often, preserving the status quo is the desired outcome. Fourth, simply adding or deleting a few words, sentences, or paragraphs to pending legislation at the right stage of its creation may achieve the desired result. Based on his twelve years in Washington, Senator Chuck Hagel reflects, “There’s no shame anymore. We’ve blown past the ethical standards, we now play on the edge of the legal standards.” ⁵³ Money buys access to members of Congress and access is power, as working together to create legislation toward achieving mutually shared objectives is only dependence corruption . But, politicians are most interested and eager to spend time with money people, which can become all consuming and to the detriment of the needs of average folks. Obviously, such political cronyism is but a short leap to crony capitalism and the corruption of the public interest. Crony capitalism exists when political cronyism spills over into the business world; self-serving friendships and family ties between business and government influence the economy and society to the extent that it corrupts the economic best interests of the public and the nation’s political ideals. The functioning of US governance conforms to this definition. In October 2009, over 1,500 lobbyists representing the financial industry were reportedly involved with lobbying the post-recession financial reform bill, which is 25 times the number representing consumer groups, unions, and other proponents of a strong consumer oriented bill. At a minimum,

money skews policies and legislation preferred by big donors and, in effect, political contributions become weighted votes . ⁵⁴ Based on his study of Senate voting, Larry Bartels comments that “senators appear to be considerably more responsible to opinions of affluent constituents than to the opinions of middle-class constituents, while the opinions of constituents in the bottom third of the income distribution have no apparent statistical effect on their senators’ roll call votes.” ⁵⁵ According to Jeffrey Birnbaum, “The protection-money racket is a good metaphor for what a lot of campaign giving is about.” ⁵⁶ Major corporate and wealthy individuals, utilizing their financial resources, business and political associations, and organizational expertise, have created additional economic strategies of influence, powerful tools to manipulate political candidates and office holders, and thus state and federal political agendas. Anonymous sources provide sizeable funds to nonprofit political organization with innocuous names, whose mission is to distribute money and propaganda as well as to solicit candidates and supporters for popular themes and causes. The objective has been to create, fund, and manage effective messaging campaigns that include media blitzes and support for pro-active groups that follow their prescribed ideologies, the Tea Party being a successful example. Activities also include organizing and funding state legislative initiatives, including writing legislation, for such themes as restricting voter registration for the nation’s lower socioeconomic population by increasing the complexity, effort, and time of the registration process. Given the demonstrated effectiveness of the aggressive Tea Party movement prior to the 2010 elections to garner conservative votes, it became fashionably pragmatic for politicians to sign pledges of support for popular ideological agendas in order to avoid the wrath of disruptive special interest groups. These include never raising taxes for any reason (Taxpayer Protection Pledge), never supporting pro-abortion legislation and funding (Pro-Life Presidential Leadership Pledge), opposing same sex marriage and Shariah law, pledging personal fidelity to one’s spouse (Defense of Marriage Act), and opposing any cuts to Social Security, including increasing the retirement age (Social Securities Protectors Pledge). ⁵⁷ Sadly, American politics has evolved to such a mindless, shameless state that an officeholder’s sworn oath to preserve, protect, and defend the Constitution is an insufficient, inadequate pledge upon which an elected politician is to perform his or her future legislative duties. Kurt Andersen refers to the 270 members of Congress who signed Grover Norquist’s Taxpayer Protection Pledge as “an unreasoning, unpersuadable robot army,” making the “robot quality of politicians more transparent and explicit by installing in each one a few crude lines of code that can’t be overridden or rewritten.” ⁵⁷ The National Rifle Association’s (NRA) political power is notoriously so terrifying for American politicians that formal pledges are unnecessary; its reputation is sufficient. In 2013, the NRA and other pro-gun groups were able to once more demonstrate their political clout and block Senate approval of universal background checks for gun purchases and other gun

control proposals, despite polls revealing that over 90 percent of Americans supported such legislation. Perhaps more striking was the ability of the gun lobby to dominate public media messages in the absence of relevant information and data from mass media outlets regarding the experiences of other nations. Australia, in an eighteen-year period prior to 1996, experienced thirteen gun-related massacres, and during that year, it suffered its worst shooting, in which thirty-five people were killed. Subsequently, gun control legislation was passed, which included 700,000 formerly legal guns being destroyed (the owners were compensated). Subsequently, studies found that over a ten-year period, gun-related homicides declined by 59 percent and gun-related suicides by 65 percent. Interestingly, the prime minister who implemented this politically risky policy survived his next election, and Australia had “200 less coffins a year on a conservative estimate.” ⁵⁸ Success in politicians has become dependent on collecting the appropriate number of such pledges, which will constitute a deck of pledges to supposedly insure proper future behavior and to qualify for campaign funds and partisan votes. Thus, those seeking office must respect donors’ investments and expectations, party leadership policy directives, and singleissue organization pledges of “thou shalt never do.” Chapter II Political and Economic Exploitation of the Middle Class : Demeaning the Principles of Socia l Justice and the Public Good For too many of us the political equality we once had was meaningless in the face of economic inequality. A small group had concentrated in their own hands an almost complete control over other people’s property, other people’s money, other people’s labor—other people’s lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness. ¹ Franklin D. Roosevelt, 1936 Given the current recessionary economy, Washington’s stalled governance system has centered on strong conflicting views concerning the distribution of created national wealth among those who have created it and the nation’s responsibility for public spending at a time of historic low “effective” corporate and “statutory” individual tax rates and record unsustainable public debt. One party believes in the theoretical model that unfettered wealth going to top earners and sharply reduced public spending is capable of stimulating a recessionary economy, balancing the federal budget, and reducing the national debt. However, this Republican model of trickle-down economics did not work during the Reagan and Bush administrations and was primarily responsible for converting an inherited Clinton budget surplus into budget deficits, reducing expenditures for the social safety net, and contributing in a major way to the Great Recession.

America’s middle-class economy has been devastated by decades of increasing and excessive inequality of income and accumulated wealth not seen since the years leading up to the Great Depression. This has created lost opportunities for future social and economic upper mobility as well as an inability of established middle-class families to maintain their life style, which has negative generational consequences. A 2012 Pew survey reports that America’s political parties “are more polarized along partisan lines than at any point in the past twenty-five years… are furthest apart in their opinions about the social safety net. There are partisan differences of 35 [percentage] points or more in opinions about the government’s responsibility to care for the poor, whether the government should help more needy people if it means adding to the debt and whether the government should guarantee all citizens enough to eat and a place to sleep.” ² This survey and other related information and data indicate a strong national sentiment that public funds for those needing basic assistance have become excessive and the nation derives little net long-term benefit from such expenditures of tax funds, i.e., wasting people’s hard earned tax dollars. Anti-altruism is a strong current in twenty-firstcentury America. Political Economics and Philosophy of New Republicanism: Anti-Altruism It has been shown that a large portion of Americans feel government is too large and too involved in their lives, taxes are too high, other people are receiving too many government services, and regulation of business should be reduced. The political rhetoric of Washington politics reflects this public opinion, the polarization of the political parties, and an unfortunate lack of altruistic values among the American people. The Pew study found the shifting dominant social issues of the last two decades are reflective of more radical conservative and polarizing national politics. Specifically, between 1987 and 2012, the values gap between parties had almost doubled and was attributable to both parties, as Republicans “clearly take a more conservative position” while Democratic values “have remained relatively constant.” This finding of a Republican party shifting toward a more conservative political philosophy is consistent with the evolution of post-1980s new Republicanism, the rise of the Tea Party, and the 2012 Republican party presidential ticket of Mitt Romney and Paul Ryan. Congressman Ryan authored recent House of Representatives budget proposals that deeply slashed social spending and lowered taxes on corporations and the wealthy, which propelled him to celebrity status with the Tea Party and to a place on the presidential ticket. As chairman of the House Budget Committee, Paul Ryan is thought of as being a big thinker, a financial wizard, and a future major player in the party. He is one of the party’s self-described “Young Guns,” who have carried the banner for the Tea Party agenda and the House’s politics of obstructionism, non-compromise, and deep budget reductions in public spending for health care, food stamps, housing, unemployment benefits, and other assistance for the most needy. Some have suggested that Ryan isn’t

just trying to reduce the federal budget so as to resolve the nation’s budget and deficit issues but, as a matter of philosophy, is “trying to make life harder for the poor—for their own good” . . . to learn a moral lesson. According to Ryan: We don’t want to turn the safety net into a hammock that lulls able-body people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives. ³ In view of Ryan’s quick ascension to prominence in the House regarding budgetary matters, which have received wide media attention, and as the party’s vice president candidate, Ryan’s political philosophy has become of great national interest. A 2005 speech provided insights into his political philosophy and track record when he told the Atlas Society, which promotes the thinking of Ayn Rand, that she had inspired his political career: “If I had to credit one thinker, one person, it would be Ayn Rand.” ³ Additionally, her works have been assigned reading for his House staff. Obviously, Ayn Rand’s philosophical appeal to Ryan, members of the Republican party, and conservatives in general is not based on her prochoice abortion or atheist spiritual positions but on her extreme notion of anti-altruism. Her philosophy of objectivism is defined as “the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.” ⁴ The main components of this philosophy include rational and ethical egoism. Rational egoism is the principle that an action is rational only if it maximizes one’s self-interest, while ethical egoism is the principle that morally one should do what is in one’s own self-interest. The individual should “exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself.” She refers to egoism as “the virtue of selfishness” in her book of that title . ⁵ Perhaps, the most revealing of Rand’s philosophical principles is her rejection of ethical altruism , that is, the rejection that individuals have the moral obligation to assist others or provide benefits for others, particularly at the expense of one’s self-interest. That the Republican vice presidential candidate and a key party leader could forcefully and continually embrace such principles over many years as being formative in shaping his political philosophy, which he admittedly credits to “one thinker, one person… Ayn Rand” spotlights the nature, agenda, and objectives of the party’s new ultra-conservative wing. Clearly, this political philosophy is decidedly inconsistent with the democratic ideals of social justice and common cause. The flaw in the Rand-Ryan political philosophy is rejecting the principle that government policies and actions in a democracy should embrace social justice and promote the public good and embracing unfettered, self-oriented individualism. Ayn Rand’s Rational and Ethical Egoism and the attitude of abandoning American values of ethical interdependence, social justice, and common cause were strikingly evident during nationally televised debate among

declared GOP presidential candidates. There was a discussion of the potential fate of a hypothetical thirty-year-old, unable to afford health insurance and who became seriously ill, requiring six weeks of intensive medical care. When the moderator asked one potential presidential candidate, Ron Paul, if the man should be left to die, his response was: “That’s what freedom is all about: taking your own risks.” Then, according to news reports, the “crowd erupted with cheers and shouts of ‘Yeah!” A columnist later commented that “at this point, American politics is fundamentally about different moral visions… compassion is out of fashion— indeed, lack of compassion has become a matter of principle… Today, ‘free to choose’ has become ‘free to die.’” ⁶ Fortunately, the 2012 elections overwhelming rejected this Tea Party based philosophy and their candidates as illustrated by all national Democratic party candidates receiving 1.1 million votes more than the Republican candidates and the loss of House and Senate seats. It is instructive to examine the historic role of government’s general involvement in and responsibility for social and economic matters and, more specifically, for providing for the less fortunate, which existed long before the often cited post-World War II examples of Social Security, Medicare, Medicaid, and the War on Poverty. E. J. Dionne points out “the federal government—was deeply involved in the American economy from the beginning of the republic. The very idea that there is a sharp and clear divide between ‘public’ and ‘private’ spheres was a creation not of the Founders, but of Gilded Age Supreme Courts in the 1870s and 1880s. In the country’s earlier years, the idea of mixing public-private corporations was common and taken for granted… Americans looked to government at all levels for both economic innovation and relief from chronic social problems.” ⁷ Illustrations include the Federal Marine Hospital System of 1798, the Civil War pension system of 1858, and early government subsidies for a national postal service. Tea Party constitutionalism and conservative originalism more generally are less interested in the Constitution’s actual words (or the “real” intentions of the Founders) than they are in rolling back democratic advances that have been made since 1787. ⁸ Brian Balogh’s 2009 book, A Government Out of Sight , notes that “although most historical accounts extrapolate America’s modern history from its supposed laissez-faire origins in the Gilded Age, no period in America’s history was less representative of America’s past than the brief era that stretched from the end of Reconstruction in 1877 through the panic of 1893.” ⁹ Prior to this period laissez-faire was assumed to be within a broader concept of the public good. Thus, with the exception of this brief era, the common good and social justice, as represented by democracies since the time of ancient Greece, has been embraced by American society. These principles include a government responsibility for the general well-being to all members of the social order, more specifically for their right to participate in and equitably share economic prosperity. The US post-1980s conservative political movement

has not only attempted to disenfranchise a large segment of the American public from receiving basic social and health benefits but also from economic opportunities and equitably sharing the nation’s great wealth. Excessive Income Inequality: Statutory vs. Effective Tax Rates During the last three decades, the GDP per capita in America has increased by 75 percent. ¹⁰ However, the bottom 90 percent of all workers received only an average 15 percent increase, while the top 1 percent averaged 150 percent and the top 0.1 percent 300 percent. Since 1979, the top 1 percent has captured over 85 percent of the country’s capital income increase as the bottom 95 percent received less than 3 percent. And, in 2007, they received 57 percent of their income from capital investments, taxed at a 15 percent rate. Both increases in gross income and lower tax rates for the wealthiest earners have accounted for the nation’s current inequitable, historic income inequality. From 1958 to 2008, the average tax rate of the richest 1 percent dropped from 51 percent to 26 percent, while, during this period, the average middle-class worker’s rate went from 15 percent to 16 percent. Just prior to the 2007 financial crisis, from 2002 to 2007, the top 1 percent received 65 percent of the gains in total national income and during the post-recession period from 2009 to 2010 received 93 percent of the income increase. ¹¹ The combined effect of the 2001 and 2003 tax cuts, extended for two years in 2010 and 2011, saved the wealthiest 1 percent (i.e., 1.4 million taxpayers) more money than the total income received by the remaining 140 million taxpayers. ¹² By 2009, as a consequence, the ten-year temporary Bush tax cuts reduced the nation’s tax revenues to its lowest level, as a share of the economy since the 1940s. However, the United States continues to suffer economically from the unwillingness of politicians to meet their responsibilities and adopt a fair and adequate system of corporate taxation, instead they pander to wealthy donors and, more generally, to the gullible electorate for votes based on promises of lower taxes for all. Ironically, this political low tax strategy of successfully winning votes from a naive electorate has shifted massive amounts of income and cumulative wealth over the decades that was traditionally received by the lower and middle classes to the wealthiest few percent. In actuality, the supposed trickle-down economic mechanism has proven to be a trickle-up mechanism for increasing the fortunes of the most wealth, which has insidiously eroded middle class purchasing power. The political environment is such that financial and economic models are not adopted by elected leaders based on in-depth knowledge, abundant wisdom, and concern for the well-being of people they represent, but as a strategy to gain and maintain dominate power over the opposition and satisfy wealthy donors. Thus, economics must be considered in a political context, absent moral considerations, and always within the cultural mentality of the times, which will directly or indirectly determine the pathway to benefits for some at the expense of others.

Unfortunately, in past decades, politicians have been unwillingness to adopt a rational financial model, whereby reserves are established during periods of economic prosperity in preparation for inevitable economic declines when taxes could be reduced in order to maintain lower and middle class consumer purchasing power. Additionally, such a budgeting strategy would also provide funding for an adequate social safety net for those suffering from the temporary economic downturn. Utilizing such a model, Canada was able to minimize the suffering of its people during the Great Recession to a lesser extent than the United States and its adequate regulation of the banking industry did not require a government bailout. Rejecting such common sense principles over the years has deepened and prolonged inevitable US recessionary periods, increased budget deficits and long-term debt, and prevented adequate public aid to assist those in need. During times of economic prosperity, designating some portion of tax revenues as future reserves is wise public policy, compared to the typical Washington political approach of immediately spending excess tax revenues and reducing taxes in order to gain favor with the general public and to provide some pork for home constituents. As if achieving great wealth from historically low tax rates and high profits and compensation were insufficient incentives and rewards for the nation’s wealthiest businesses and individuals, generous tax loopholes provide for significantly lower effective federal tax rates being paid than required by the advertised statutory rates . Such tax law schemes that enhance corporate profits and CEO compensation significantly reduce government revenues. Corporations counter with the specious argument that, by international comparisons, the US corporate tax rate of 35 percent is too high and should be reduced further in order to make America more competitive in an increasingly competitive global economy. Then again, the reality of actual or effective corporate tax rates paid is quite different and sometimes stranger than fiction! According to the Federal Reserve Bank of St. Louis, the effective US corporate tax rate declined to 17.8 percent in 2012 compared to 42.5 percent in 1960. ¹³ US Honeywell, in a recent five-year period, paid taxes in the United States and abroad equal to 15 percent of profits. United Technologies reported an average of 24 percent rate over that time period, while its German rival Siemens paid 29 percent of its total profits in taxes. The percentage of profits paid in taxes by various business sectors are: retailers 31 percent, manufacturers 26 percent, financial services 20 percent, real estate 19 percent, and mining 6 percent. Thus, on the whole, US companies pay about a quarter of their profits in federal taxes. The degree to which creative accounting results in lost tax revenue is uncertain but is estimated at $50 billion a year and special tax benefits for specific businesses or industries are estimated at over $100 billion a year. Such tax provisions for the oil industry represents about $2 billion a year. In the first quarter of 2011, the big five oil companies reported earnings of $35 billion. ¹³ The paradox of the United States tax code—high statutory rates with bountiful subsidies, shelters and special breaks—has made American multinationals “world leaders in tax avoidance,” according to Edward D.

Kleinbard, a professor at the University of Southern California, who was head of the congressional joint committee on taxes. MIT professor Michelle Hanlon says the country needs to completely revamp the way it taxes corporations comments: “Whether the test is fairness or efficiency, the US system gets really low marks.” ¹³ Nevertheless, based on vague, self-serving, irrational, political ideologies, and half-baked economic concepts, the public is continually and emphatically told that taxes on individuals and corporations are too high but without reference to some quantifiable internationally adopted standard of “too high.” To this point, the Congressional Budget Office estimates that, in 2011, net federal taxes consumed only 14.8 percent of GDP, the lowest since the Reagan administration’s 1984 value of 17.3 percent and lower than the post-WWII annual average of 18.5 percent. Such values for 2009 and 2010 were also less than 15 percent. Accordingly, based on national wealth production, the net tax revenues paid by Americans are at a fifty-year low. ¹⁴ Thus, one constantly hears only that the official statutory corporate tax rate in the United States is high compared with other countries, which is true in theory, but, in practice, not necessarily relevant. Republicans say global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest corporate tax burden of any of the Organization for Economic Cooperation and Development (OECD) member nations. Total tax revenues as a share of GDP are at their lowest level in over two generations and corporate tax revenues as a share of GDP are the lowest among all major industrialized nations. ¹⁴ Corporate taxes amounted to $191 billion in 2010 or 9 percent of all government revenue, which translates into 1.3 percent of GDP. Most industrial nations receive about 2.5 percent. The statutory corporate tax rate in the United States is, with the exception of Japan, the highest in the world. Nevertheless, given the numerous corporate tax breaks and loopholes, not available to other countries, the effective or average US corporate rate paid is less than Germany’s and equal to that of Britain. ¹⁴ Accordingly, in 2010, US companies paid the least amount in taxes as a share of GDP among the twenty richest nations in the world. Thus, by an internationally adopted standard, the current net American tax burden is a light load for both individuals and corporations, and the net taxes paid, as a percentage of GDP, is less than the post-WWII average. The bottom line is that based on international standards and relative to the world’s other developed nations, the United States suffers from three decades of deficient tax revenues, based on tax policies that have enhanced the wealth of the nation’s richest citizens at the expense of, not just the lower and middle classes, but 90 percent of Americans and the nation’s economic vitality. Creative Tax Schemes and Loopholes In 2008, the Government Accounting Office (GAO) found that 55 percent of US companies paid no federal taxes during at least one year of a seven-year period studied. Unfortunately, and to the detriment of the nation’s financial

stability, America’s tax code, while having a high corporate statutory tax rate, also includes a multitude of business tax schemes and federal loopholes. A new corporate class of Supercitizens , representing worldly mega-businesses, has mastered the art of tax avoidance by effectively and selectively exploiting international legal systems and tax policies and manipulating political cultures abroad. This methodology relies on mathematical models that yield the most advantageous mix of geographic earning strategies, upon which minimum taxes are paid from revenues from a multitude of individual countries. One such tax avoidance scheme allows foreign profits to remain offshore indefinitely without being taxed; such corporate revenues are often invested in foreign countries rather than in the United States. In 2011, American companies operating in foreign countries actively lobbied Congress for approval to “repatriate” a total of about $1 trillion in profits held in their countries of operation, but only if they were “rewarded” with a reduced tax rate (5.25 percent) rather than the statutory tax rate of 35 percent. These companies included Apple, Google, and Microsoft, which had stashed a combined total of $58 billion in offshore profits, waiting for a favorable change in tax policy. According to their chief lobbyist, the US Chamber of Commerce, the money could create as many as 2.9 million jobs. However, critics point out that the history of such temporary tax holidays demonstrates that such tax repatriation is used to do what companies would have done anyway and doesn’t result in net new jobs or in stimulating the economy. At the time of the 2011 request, there was a record level of over a trillion dollars in untapped investment capital at home, which could have been utilized, if needed, to stimulate the economy and create additional jobs. The Congressional Research Service reports US corporate subsidiaries operating in the five most profitable tax havens of the Netherlands, Ireland, Bermuda, Switzerland, and Luxembourg generated 43 percent of their total foreign profits in 2008. However, these subsidiaries constituted only 4 percent of their foreign employees and 7 percent of their foreign investments. In total, the “territorial system” utilized by American corporations is estimated to have $1.7 trillion of cash “trapped” in foreign nations hopefully waiting for another tax holiday, denying the US Treasury $130 billion in tax revenues over a ten year period. In 2004, when Congress approved such a tax holiday, it also recommended that the practice should not be permitted again for fear of establishing a precedent that would encourage companies to stockpile profits overseas, waiting for the next tax holiday. ¹⁵ In 2011, Apple paid cash taxes of $3.3 billion worldwide on reported profits of $34.2 billion, a tax rate of only 9.8 percent, a sizeable contrast to WalMart, which paid 24 percent, which is about average for a nontechnology corporation. ¹⁶ Due to the nature of the technology industry, American businesses (including Apple and other major corporations) devised complex business strategies to ensure they paid a significantly lower tax rate. These tax-saving corporate strategies, which retain enormous sums of revenue for profits, are the result of creative lawyers, accountants, and an outmoded tax code design for another era.

Tech companies derive revenue from royalties on intellectual properties, such as patents on software and on digital products distributed via the Internet, which inherently permits the transmission of revenues to any country of the corporation’s choice. Consequently, these companies strategically avoid paying as much taxes as possible, compared to traditional business sectors. It is estimated that during the last two years, the 71 technology companies on the Standard & Poor’s (S&P) 500, a global stock index, paid worldwide taxes averaging a third less than other S&P companies. Unfortunately, outdated tax policies and loopholes, the result of well-funded corporate lobbying efforts and a corrupt and ineffective political system, have led to reduced tax revenues while producing record income for corporations and their investors. The components of Apple’s tax avoidance strategy, which has set the standard for other tech corporations, began when the computer company established a small office in Reno, Nevada, a state with a zero corporate tax rate. This allowed Apple to avoid the 8.84 percent rate in California, where its corporate offices are located. In 2006, Apple established Braeburn Capital in Reno to manage and invest the company’s cash reserves; as of 2012, these reserves have reportedly earned $2.5 billion in interest and dividends. ¹⁶ Additional small, innocuous offices or subsidiaries were established in low tax havens of Ireland, the Netherlands, Luxembourg, and the British Virgin Islands. This international pipeline routed profits to designated locations, which resulted in Apple’s US taxes being reduced by an estimated $2.4 billion in 2011. Apple’s critics note that while the company is based in the United States, its profits appear to be foreign, even though its corporate leadership and all design, marketing, research, and development activities are based in the United States. Also, it is noted that the tax code specifically defines a company’s source of earnings as the location where value is created, not where products are sold. But Apple has been able to assign about 70 percent of its profits as foreign based. Of particular significance in Apple’s tax avoidance strategy is the mechanism of funneling profits from country to country, ending up in a tax haven. Many US corporations now utilize the so-called “Double Irish with a Dutch Sandwich” strategy of transmitting profits around the globe. One pathway was designed for Apple’s US consumer profits, which were directed to its Irish subsidiary as royalties rather than retaining them in the United States to be taxed at a 35 percent federal rate. By Irish law, this subsidiary, controlled by foreign managers (from, for example, a Caribbean country), may move profits out of the country tax-free. A second route for the company’s foreign consumer profits went to a different Irish subsidiary, which utilizes Irish treaties that permit inter-European transfers to be channeled tax-free through the Netherlands, first to an Irish subsidiary and then to a Caribbean tax haven. Tech companies have also been successful in lobbying state governments for tax concessions. In 2009, responding to the lobbying efforts of Cisco, Oracle, Apple, and other California-based companies, the state legislature reduced taxes on California corporations with extensive business operations in other

states and countries. It is estimated that this legislation reduced state revenue in California by $1.5 billion a year. It is noted that the 2013 California budget deficit is projected to be $9.2 billion, even after the state reduces health programs, public university budgets, and K-12 spending by $4.8 billion. ¹⁶ Although Steve Jobs received high praise for his genius as an inventor, designer, and businessperson, Apple does not appear to embrace a high priority for corporate citizenship. At a time when the Supreme Court has recently validated the rights of corporations to possess the same free speech rights as individuals, it is hard to find a business that acts responsible for the well-being of the nation. Interestingly, over the decades, corporations have gradually acquired legal protection under five of the ten amendments of the Bill of Rights, including free speech, freedom from unreasonable search and seizures, prohibition of double jeopardy, and rights of trial by jury in criminal and civil matters. All human citizens receive individual rights, but they also are expected to assume some obligations and responsibilities to the nation. There should be a balance between corporate freedoms and rights and corporate citizenship; a business has a social responsibility for improving the nation’s long-term well-being. However, this is an era when individuals, corporations, and organizations seek maximum rights for themselves while minimizing their responsibilities, time, and earnings in support of the common good. Tom Friedman notes, “A big mismatch exists today between how US CEOs look at the world and how many American politicians and parents look at the world.” The pressure on American politicians worried about elections and parents worried about jobs for their children is immense; it is all about “made in America.” On the other hand, CEOs are increasingly striving for “made in the world—a world where more and more products are now imagined everywhere, designed everywhere, manufactured everywhere in global supply chains and sold everywhere… . CEOs are increasingly citizens of the world with mixed loyalties.” When, at a White House meeting of business CEOs, President Obama asked Steve Jobs if he saw a time when his China production work would be brought home, he replied no. Friedman suggests that “the credo of CEOs is: ‘You only hire someone—anywhere—if you absolutely have to,’ if a smarter machine, robot, or computer program is not available.” ¹⁷ Creative financial schemes and tax loopholes are abundant within the corporate world. Carnival Corporation, located in Miami, operates a worldwide cruise business. For the five-year period ending in 2010, its corporate taxes were 1.1 percent on its $11.3 billion profits. The corporation utilized loopholes in tax codes, including incorporating the company in Panama. More broadly, 115 corporations listed in the Standard & Poor’s index paid corporate taxes at a rate of less than 20 percent; for example, Boeing (4.5 percent), Southwest Airlines (6.2 percent), Yahoo (7 percent), Prudential Financial (7.6 percent), and General Electric (14.3 percent). ¹⁸ Individual big earners are also afforded loopholes.

Nicholas Kristof suggests that “if there were an award for Most Unconscionable Tax Loophole,” it would go to the carried interest tax rate, which benefits some of highest paid people in the world, particularly managers of hedge funds, private equity funds, venture capital funds, and real estate funds. One such manager, John Paulson, was paid $4.9 billion in 2010, equivalent to the nation’s average per capita income for 184,000 individuals. ¹⁹ This tax rate policy enables performance bonuses to be taxed as long-term capital gains (a rate of 15 percent) rather than at the maximum personal tax rate of 35 percent. Note that the carried interest preferential capital gains benefit is defined in terms of one’s capital invested in a financial partnership, and not on labor. However, the successful performance of a hedge fund manager, earning billions of dollars, is based on supplying the mental and physical labor necessary to profitably invest other people’s capital, for which the individual typically receives a 20 percent fee. Consequently, this tax loophole allows a financial manager’s labor to be taxed at 15 percent rather than the law’s intended 35 percent. Closing this loophole could increase tax revenues by an estimated $20 billion over the next ten years. Stanford University’s Francis Fukuyama contends: One critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure on to the rest of society. ²⁰ According to projections by the Joint Committee on Taxation, the Congressional Budget Office, and the Treasury, the total increase in tax revenues from eliminating the 2001 Bush tax cuts for those earning more than $1 million a year, on income from capital gains and dividends, and eliminating the loophole for a lower tax rate for hedge fund managers would be $500 billion over the next decade. ²¹ Another tax law loophole that primarily benefits manufacturers and the oil and gas industry is an accounting technique referred to as “last in, first out” (or LIFO), which saves corporations approximately $8 billion a year in taxes. In a time of rising material costs, this provision allows companies to utilize for tax purposes the cost of materials most recently bought or produced (i.e., those most recently acquired), rather than the actual cost of the particular material involved in a specific transaction when it was acquired. In essence, this policy ensures that the appropriate calculation of taxable income should yield the lowest corporate taxes and the highest business profits rather than reflect the sound, rational principles of material acquisition, utilization, and commercial disposition. Such irrational legislation, inspired by corporate-government alliances, explains how such vast amounts of income and wealth have been created during last four decades at the expense of a vibrant middle class economy. Tax breaks, exemptions, deductions, credits, and other loopholes cost the federal government about $1.2 trillion in lost revenue in 2010 (compare that amount to the budget deficit of $1.3 trillion). ²²

FDR’s words are as relevant today as they were at the time he spoke them in 1936: For too many of us the political equality we once had was meaningless in the face of economic inequality. A small group had concentrated in their own hands an almost complete control over other people’s property, other people’s money, other people’s labor—other people’s lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness. ²³ Money, Privilege, and the Power of Politics Increasingly over the last few decades, American society has abandoned historic cultural values and tenants of democracy, which recognize that all segments of society should share equitably in the nation’s prosperity and possess equal rights to participate in its governance system. Big Money has achieved its goal: significantly shifting the nation’s productivity to the wealthiest Americans and gaining a dominant influence over state and federal legislation. As an additional political advantage for the 2012 presidential election, a national campaign was undertaken by Republican governors and state legislators to selectively reduce participation of voter groups historically not aligned with the party’s new conservative agenda and thus the interests of the business sector. According to the Brennan Center for Justice at New York University School of Law, at least 180 restrictive voter bills were introduced since the beginning of 2011 in at least forty-one states; “sixteen states have passed restrictive voting laws that had the potential to impact the 2012 election” as they “account for 214 electoral votes, or nearly 79 percent of the total needed to win the presidency.” ²⁴ The most prominent provision was, in many cases, the requirement for an approved photo identification document, replacing state voter cards and household utility bills, historically used for residency verification. In Wisconsin, college ID cards were deemed unacceptable. These disenfranchised voters, including young voters, lowincome voters, the elderly, and minorities, historically voted Democratic. ²⁵ It is estimated that as many as 11 percent, or twenty-one million citizens, do not having government ID cards. While the stated objective of this nationwide Republican movement was to prevent voter fraud, critics note that there is very little data to suggest such voter fraud actually exists. The Kansas secretary of state, in promoting that state’s proposal, cited 221 reported cases since 1997, an extremely small percentage of total voters. The Wichita Eagle investigated the local cases on the list and reported that almost all were honest mistakes. ²⁵ The Brennan Center equated the probability of someone successfully impersonating another voter as being “more rare than being struck by lightning” and pointed out that “prior to the 2006 election, no state required its voters to show government-issued photo ID at the polls (or elsewhere) in order to vote.” ²⁴ Postmortems of the 2012 elections indicate that the wellpublicized nationwide Republican initiatives may have backfired, as the groups targeted by their voter ID program turned out in record numbers and voted overwhelmingly for Democratic candidates (see chapter VII).

Inevitably, the pathway of human history involves tension and clashes among the middle class, the wealthy elite, and the governance system over money, social privileges, and political power. The consequences of these clashes often contaminate and degrade cultural values, social cohesion, and a sense of common purpose. Those who possess the greatest wealth, knowledge, and social position often manipulate the social order and misuse economic and political systems, rather than contributing constructively to socio-economic progress and stability. There are some conceptual defects inherent in capitalism, but they have not been the major culprit in creating an unstable, unjust socio-economic reality in America today; the causes mostly lie with corporate executives and elected leaders who abuse their privileged positions and responsibilities to society and violate professional standards of ethics. The theme has all too often been “cleverness gets all that it can, and mediocrity gets the rest.” Within a highly competitive and successful capitalist environment, the instinctive human drive to succeed becomes most acute and rampant, as incentives become abundant and rewards prove impossible to resist. The mere existence of substantial economic prosperity within mature civilizations spawns a high degree of self-centered individualism and infectious greedy materialism. Ultimately, political manipulation and control of the business and financial sectors enables a small minority of the population to acquire a disproportionate share of wealth, utilizing methods that minimize national wealth allotted to the masses. This has been the nature of human history: the instinctive human drive to succeed brings out the best as well as the worst of attitudes and behavior; the result has been spectacular successes and unmitigated failures of social orders. Alternatively, if government, following the lead and support of the electorate, is willing to balance the dynamics of the private and public sectors, it will restrain and minimize the potential for abuse inherent in democratic capitalism. Clearly, such outcomes are dependent on respecting altruistic values, promoting fairness, and protecting the common good, which describes the US culture from the beginning of World War II through the early 1970s, an era of rare, broadly shared national prosperity and exceptional contributions to world leadership. Some nations, notably Japan and the Scandinavian countries, have been more successful in maintaining a stronger societal commitment to altruistic values and social justice than the United States. These nations have maintained strong economy rankings among the developed nations, while providing the best overall quality of life for all their citizens. In contrast, over the last few decades, an increasingly larger percentage of Americans have become disadvantaged; they lack adequate food, shelter, health care, and education, while income and acquired wealth have been massively transferred from a growing underclass and concentrated in historic proportions within the wealthiest few percentage of the population. Paradoxically, of the twenty richest nations, the United States spends the lowest percentage of GDP for health and social problems, while collecting the lowest percentage of GDP in taxes.

Segments of American society have essentially been written off as an unavoidable by-product of the success in being the world’s richest nation; they are accepted as the exhaust of the corrupt engine of democratic capitalism. There are proven solutions to many of the nation’s social and economic issues, which mostly affect the quality of life of an underclass that now represents about 80 percent of the American population, but these solutions have been deemed unaffordable by those possessing an excessive concentration of wealth and political power. This attitude represents the denial of opportunities for people to pursue socio-economic advancement and achieve a satisfying quality of life—a dramatic shift of the dominant American cultural mentality of fifty years ago. American society has become a culture that self-righteously condemns the less fortunate for their lack of achievement and self-sufficiency while, at the same time, reducing opportunities to attain greater success, ignoring society’s responsibility to safeguard the principles of the public good and social justice. Mitt Romney (now infamous) comments about the “47 percent” are sadly quite revealing and unfortunately representative of the new post-1980s Republicanism: Well, there are 47 percent of the people who will vote for the president [Obama] no matter what. There are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement and government should give it to them. And they will vote for this president no matter what. I mean, the president starts off with 48, 49   .   .   . I mean, he starts off with a huge number. These are people who pay no income tax; 47 percent of Americans pay no income tax. So our message of low taxes doesn’t connect. He’ll be out there talking about tax cuts for the rich. I mean, that’s what they sell every four years. And so my job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives. ²⁶ Democratic principles, as applied to maintaining a just society, emphasize a balance among entitlements of rights, freedoms, and benefits extended to individuals by society and expectations of concomitant duties and responsibilities to participate in creating and maintaining the common good and respecting the need to protect the well-being for all members of society. While the United States produces the greatest wealth and possesses the greatest military power in the world, it cannot claim first place, or even a high standing, in having lived up to these democratic principles. Don’t Americans comprehend these principles? Or is this another causality of the education system, knowingly adhering to a philosophy of self-focused individualism, or just finding politics too complex, corrupt, and impossibly ineffective? The answer is, to varying degrees, all of the above. Knowledge Deposed by “Infotainment” and Anti-Intellectualism Clearly in today’s America, it has become exceedingly difficult for individuals of average intelligence, dedicated to the democratic process and its principles, to remain adequately informed of governance processes and

policies, current events, and economics; without that knowledge, they cannot meaningfully participate in civic affairs. First, the process of US cultural maturation has reached a point where the quantity of data and complexity of information has overloaded the senses, and an unrealistic effort is required to adequately digest the necessary material. Second, any thoughtful, rational approach to reach this objective is frustrated by the decline of credible sources of accurate, unbiased, and in-depth information. Even with the proliferation of modern technological communication tools and methodologies, the task of regularly accessing, sorting, and utilizing journalistically sound material is a formidable task, which often concludes with a sense of despair. Abundant mass communication techniques, utilizing wireless smart phones, the Internet, and e-mail, are capable of rapidly distributing audio, text, and visual information around the world; these techniques can benefit individuals, retail companies, and nonprofit organizations. According to Adam Thierer of the Progress and Freedom Foundation, there were over 600 cable TV channels, 2,200 broadcast TV stations, 13,000 over-the-air radio stations, over 20,000 magazines, and 276,000 books published in 2010. Additionally, there were 255 million websites, about 26 million blogs read and a billion videos viewed on YouTube every day (twenty hours of videos are uploaded every minute, resulting in 12.2 billion videos viewed each month). ²⁷ However, merely having an abundance of sources of information doesn’t automatically mean that the public is motivated to seek, access, and thoughtfully process high quality, in-depth information regarding important political and socio-economic issues. Rather, it appears that modern technological advancements have been utilized to a greater extent for personal communication and entertainment, commercial marketing, and political purposes. This has created a global distribution of information in the form of announcements, appeals, newsletters, games, and visual materials of all kinds, including propaganda to vast audiences at low cost. In today’s media world, there are many pleasant distractions for people’s leisure time. While the totality of both traditional and technological distribution of political and economic information represents a wide range of questionable accuracy, quality, and motives, its impact has been considerable. However, information that is unknowingly accepted as valid is often tainted by ideologies, fear tactics, prejudices, and self-serving interests. Versions of political and economic reality and wisdom are carefully crafted to justify the pursuit of the promoter’s self-interest, disguised as fact. This is the basis for much of what Americans read, view, and hear based on today’s abundant and conflicting sources of information. Instead of seeking broad-based information and in-depth knowledge to learn about and gain insights into complex issues, Americans seem satisfied with relying on information from sources that are known to be biased; they often accept brief political talking points to validate their established points of view and self-interest within a combative and competitive political environment. Americans have demonstrated a severe lack of basic political concepts, economic knowledge, and current events while eagerly offering opinions regarding the actions of government leaders. An ABC/Washington Post poll

found that 56 percent of Americans supported smaller government and fewer services. However, respondents to such surveys overwhelming utilized and valued the services and benefits received from government more often than they realized or would admit. A 2008 poll by the Cornell Survey Institute asked people if they had “ever used a government social program,” with 57 percent responding “no.” But when presented with a list of twentyone federal policies, which included Social Security, unemployment insurance, the tax deduction for home mortgage interest, student loans, Medicare, and the exemption from taxes on employer-provided health and retirement benefits, 94 percent of them admitted to using at least one, with the average being four. Interestingly, “a respondent who self-identified as ‘extremely liberal’ was 20 percent points more likely to acknowledge using a government program than someone who used the same number of programs but was extremely conservative… . Individual political views partly account for their perceptions.” ²⁸ Additionally, those who thought too much money was being spent on welfare programs were less likely to admit using them. Although American students now spend more years, on average, in formal education, civic knowledge has not improved, and the average college graduate today knows less about current public affairs than graduates in the 1940s. ²⁹ The public’s interest in current events has declined by about 20 percent over the last quarter century, and more narrowly, political interest has declined by about 20 percent between 1975 and 1999. Studies show intergenerational differences and intracohort changes in political knowledge and interest. From the 1940s to mid-1970s, young people were as well informed as their elders, but this is no longer true. Currently, people under thirty demonstrate less knowledge of current events than their elders do now and less than their same age group did three decades ago. Consistent with this trend, America’s traditional delivery of news and information has undergone a gradual but significant transformation over the last few decades. Increasingly, the public has come to depend less on traditional TV news programming, weekly magazines, and daily newspapers, preferring the anytime access to news and events from cable TV and Internet sources. Consequently, the number of daily newspapers and weekly news magazines has declined, and the news content of the remaining publications has, with a few exceptions, become increasingly abbreviated. Due to severe reductions of traditional print customers, the print industry has been forced to pursue new business models, some of which incorporate and integrate print sources with access to Internet materials. In 1948, the nation’s total newspaper circulation was 1.3 papers per household, but during the last half century, while people’s education level dramatically increased, newspaper readership declined by 57 percent. This downward trend of interest in current events is only one aspect of a general pattern; the shift in daily newspaper readership is only one example of generational succession . In 2000, 70 percent of those born before 1929 read at least one newspaper daily, compared to 60 percent of those born between 1929 and 1945, 48 percent born between 1945 and 1960, and 28 percent born after 1960. Significantly, these generational percentages are relatively constant over the time period, which also applies to those who now primarily rely on the Internet. ³⁰

From 1993 to 1998, evening network TV viewership dropped from 60 percent to 38 percent. A 1997 NBC study noted that the average age for all prime-time programming was forty-two, but for the nightly news it was fiftyseven. The most striking change in recent decades is that “most of the time, energy, and creativity of the electronic media… is devoted not to news, but to entertainment.” ³⁰ Accordingly, television and radio news entities and the print media have attempted to reinvent themselves in order to meet the public’s shifting appetite for fewer limitations on time, place, format, and content. TV news programming has thus made the transition from a more balanced, informative, and in-depth coverage of important (“hard”) news to a more entertainment-oriented coverage of interesting events (“soft” news). Additionally, some television outlets have become unapologetic promoters of biased social and political ideologies under the guise of news programming, as this theme has proven to attract large audiences and revenues. Fox News, with revenues of $1.21 billion, ad revenue of $622 million, and profits of $535 million, led all other cable news competitors in all three categories. ³¹ But unequivocally, television news is no longer a saleable commodity in America; the Walter Cronkite-style, content, and integrity of TV journalism has disappeared, as many viewers seek entertaining political commentaries and politically slanted, partisan interpretations of current events that conform to their established ideologies and biases. American audiences show little interest and patience with comprehensive, broad-based coverage of economic and political concepts, policies, or events. Viewer interests, and thus advertisement revenues, are associated with entertainment, thus news media content for the most part follows this primary theme. In the past, journalistic responsibility and professional ethics mandated accurate, unbiased reporting of important facts, issues, and events, but abbreviated, opinionated, emotional, and often superficial programming has displaced accountability. Meanwhile, conservative politicians continuously seek to eliminate tax support for Public Broadcasting Service (PBS), America’s only news broadcast organization that can approximate the journalistic quality of the world-renown British Broadcasting Corporation. Clearly, the traditional print media is fading, radio and television news industries have been reprogrammed, and wireless and Internet sources of information are becoming increasingly popular; these elements combine to produce an inadequately educated public that is unable to participate as mature members of a democracy. Quite simply, the majority of citizens are too busy and disinterested to seek an adequate understanding of everexpanding and increasingly complex socio-economic and political issues. As a consequence, many citizens, possessing an inadequate knowledge base and an average attention span of a tweet, are unable to intellectually digest the complexities and nuisances of modern affairs and are easy prey for the slick, modern political marketing tactics designed to confuse the public. Hence, media personalities and politicians, utilizing irrational political rhetoric that maximizes skepticism and criticism, have successfully filled this knowledge vacuum, often with erroneous and misleading information,

diminishing the public’s ability to participate meaningfully in a highly competitive political and economic environment. Unfortunately, many citizens are unable or unwilling to expend the enormous amount of time and effort that is required to sift through the blizzard of conflicting political and economic information in order to determine facts and think for themselves. Mann and Ornstein assess this mass media evolution: With the increased competition for eyeballs and readers, all media have become more focused on sensationalism and extremism, on infotainment over information, and, in the process, the culture has coarsened. No lie is too extreme to be published, aired, and repeated, with little or no repercussion for its perpetrator. The audiences that hear them repeatedly believe the lies. ³² A general preference for infotainment and the lack of socio-economic and political knowledge provide ample opportunity for the general population to be led down the political garden path. Politicians and personalities have come to realize that being outrageous creates attention; it breeds public name recognition and leads to book deals, lucrative speaking engagements, and cable TV careers. This has become the strategy for aspiring, little-known politicians to gain national name recognition and compete for party nominations, as demonstrated by the crop of 2012 Republican presidential hopefuls that debated on national TV. Jeffrey Sachs analyzes an average American’s “flow of information” by looking at three segments: time spent receiving, number of words transmitted, and number of gigabytes transmitted (primarily video and computer games). ³³ In 2009, Americans spent on average 4.91 hours per day viewing TV (44.8 percent of total information flow), 2.22 hours listening to radio (18.8 percent of total), 1.93 hours using a computer (16.4 percent of total), and 0.93 hours with computer games (7.9 percent of total). Print represented 26 percent of the words transmitted in 1960, but that declined to 9 percent by 2008. “The insulated mind-set of individuals who know precious little history and civics and never read a book or visit a museum is fast becoming a common, shame-free condition.” ³⁴ Perhaps the most interesting question resulting from this data is how this information flow is divided between one’s general knowledge base and specific business and school needs compared with entertainment, shopping, travel, and other leisure activities. America seems to have entered a period of declining interest in meaningful ideas and concepts that require prolonged, intense thinking; people no longer wish to become more knowledgeable or better prepared to contribute to society. A thirst for knowledge has been steadily displaced in large measure by a mindless addiction to trivial information and communication, which has driven out a thirst for ideas, sound thinking, and broader understanding. Susan Jacoby in The Age of American Unreason blames the culture of “infotainment,” sound bites, fundamentalist religion, and ideological rigidity for a “strain of intertwined ignorance, anti-rationalism, and antiintellectualism.” ³⁵ She questions how, given this culture, Americans could

participate in an informed and reasoned debate on such important issues as embryonic stem cell research. Kristof, who cites Jacoby’s work, concludes that the “dumbing-down of discourse” in America has been particularly striking since the 1970s: “Think of the devolution of the emblematic conservative voice from William Buckley to Bill O’Reilly. It is enough to make one doubt Darwin.” ³⁶ That is, the transition from a conservative media source such as the National Review to Fox News speaks volumes. E. J. Dionne Jr. comments, “William F. Buckley Jr. challenged such far-right ideas as cranky, foolish, and extreme, while today’s conservative leaders have held their tongues or even offered encouragement to notions discredited long ago.” ³⁷ Neal Gabler, in a New York Times article, “The Elusive Big Idea,” sees Americans as living in an increasingly “post-idea world” in which big, thought-provoking ideas possess so little value that “fewer people are generating them and few outlets are disseminating them.” We prefer knowing to thinking because knowing has more immediate value. It keeps us in the loop, keeps us connected to our friends and our cohort. Few talk ideas. Everyone talks information, usually personal information   .   .   .   . The social networking world involves basically information exchanges, designed to feed the insatiable information hunger, though this is hardly the kind of information that generates ideas. ³⁸ America’s “Me decade” (the 1970s) has evolved into a more deeply rooted culture of individual self-absorption, self-glorification, and self-promotion, which has been greatly amplified by advanced communication technologies, the Internet culture, and socialization techniques such as Facebook and Twitter. These commercialized promotional systems allow participants to broadcast personal information, thereby enhancing each user’s status and self-worth while providing a plentiful source of daily entertainment for a cohort of admirers. Significantly, this social networking phenomenon, and the Internet in general, provides its users with a potential avalanche of information, which has transformed their daily lives but has little impact on valuable thinking or the creation of new knowledge. To a large extent, the pursuit of entertaining information has driven out valuable thinking time. It may change the way we live but rarely transforms the way we think (but what feels good must be good). Christopher Lasch depicts the cultural transition from the pre-1970s ego of the “American individualist” to a modern narcissism that “depends on others to validate his self-esteem.” Further, he envisions the individual as “seeing his ‘grandiose self’ reflected in the attentions of others, or by attaching himself to those who radiate celebrity notoriety, power, and charisma.” ³⁹ Athletes, politicians, entertainers, and those who are famous for just being famous provide the masses with their images, thoughts, and daily activities so as to reinforce a particular image and retain celebrity status. The nonfamous majority enjoys the hype while engaging in self-promotion, seeking entertainment, and welcoming a dose of therapy, an addictive diversion from an increasingly stressful, fearful, competitive, and complex existence.

This intense socio-cultural preoccupation with satisfying one’s egocentric emotional needs and seeking recognition, which has evolved and intensified over the last few decades, parallels a more general cultural drift toward excessive materialistic consumption, record personal debt, and a massive new market for re-recreating youthful appearances via cosmetics, clothing styles, and cosmetic surgery. These shifting human values and priorities are consistent with a society’s declining altruistic mentality and concern for all members of the social order, which is systematically displaced by a more self-centered, sensate materialistic culture. Unfortunately, the dumbing down of America’s discourse and its “strain of intertwined lack of knowledge, anti-rationalism, and anti-intellectualism” permeate politics and have proven to be a useful marketing asset for promoting defective economic theories, political concepts, and candidates. ³⁸ To this point, Gabler notes that “we live in a post-Enlightenment age in which rationality, science, evidence, logical argument, and debate have lost the battle in many sectors, and perhaps even in society generally, to superstition, faith, opinion, and orthodoxy.” ³⁸ As a consequence, an alliance of political, corporate, and media subcultures, representing narrow ideologies and unlimited financial resources, has filled this vacuum of reason, compassion, and wisdom to successfully manipulate popular opinion, empower political parties and office holders, corrupting American society and rendering the governance system impotent. In the process, self-serving and extreme economic, political, and ideological views have eroded the ideals of democracy and created unprecedented wealth and power within a small segment of society, while creating a highly dysfunctional culture. Transparency International, a German nonprofit organization that analyzes global corruption (defined as “the abuse of public office for private gains”), assessed “the degree to which corruption is perceived to exist among a country’s public officials and politicians.” In 2007, the United States ranked last in lack of corruption, while the Scandinavian countries, New Zealand, Singapore, the Netherlands, Switzerland, and Canada ranked among the best. ⁴⁰ Consistent with this German finding, in the second decade of the twenty-first century, America is enmeshed in ideological discourses that are intellectually sloppy and anti-intellectual, while its governmental functions and political parties are substantially controlled by Big Money. Major topics that are continuously evading rational discussion include minimizing global warming, appropriate government regulation of the financial industry and the environment, resolution of an unsustainable public debt, regulating campaign finance, and resuscitating a failing economy. In the fall of 2011, three of the eight potential Republican presidential candidates denied in public debates that climate change was real, and two of them dismissed evolution as being an unproven theory. The oratory of those running for political office most often consists of scripted talking points concocted by party leaders—tidbits of information and misinformation

pertaining to the opposition’s inadequate policies and performance. Political presentations, comments, and responses to questions are rarely constructive, rational, in-depth, or thought provoking, but they are careful to avoid important issues facing the nation or alarming their base supporters. The Politics of Obstructionism America’s abandonment of the values and principles of the pre-1960 generations is embarrassingly and prominently displayed by its current political environment of unabashedly placing party victories over the opposition as paramount, regardless of the issues and long-term impact on the nation. Elections and legislative processes have become analogous to sporting contests, where victories are not just important, they are the only acceptable outcome, regardless of the need to forsake compassion, civility, ethics, and integrity. In the 2009-2012 congressional legislative sessions, the minority party consistently voted in unity against the administration on major issues, based on the publicly acknowledged strategy of creating an unfavorable record for the majority party before the next election. Republicans adhered to the same negative legislative tactics, derived from Newt Gingrich’s 1990s Westminster parliamentary strategy, in an attempt to insure that the sitting president would be unsuccessful in leading the nation and would fail to be re-elected. This strategy is consistent with the British parliamentary system, which does not require voting approval of the minority government members on pending legislation; this is clearly inappropriate for the American system of government. However, it has been utilized in the United States since the 1990s. This is illustrated by Republican Senate Minority Leader Mitch McConnell’s now famous statement in 2010, “The single most important thing we want to achieve is for President Obama to be a one-term president.” In addition to opposing any significant new legislative proposal that might eventually reflect positively on the administration, this strategy includes sabotaging the implementation of existing laws; the minority party is unable to repeal these laws but can prevent existing laws from being effectively implemented. For example, the Republican majority of the 2011 House of Representatives passed symbolic legislation denying funding for implementing provisions of the Affordable Health Care Act, for the Securities and Exchange Commission to enforce financial reforms of the investment industry, and for less significant advancements such as enforcement of the law that increases efficiency standards for light bulbs from the current 10 percent to 60 percent by 2020. Another example of promoting the politics of dysfunction occurred in December 2011, when Senate Republicans blocked President Obama’s nominee to head the new Consumer Financial Protection Bureau; the new regulatory agency had yet to begin functioning, but GOP leaders objected to the scope of its powers. McConnell stated, “Until three changes are made [to the bureau’s mandate], we won’t support a nominee for this bureau.” Senator Sherrod Brown reported that according to the Senate historian, “never in the history of the United States Senate has one political party tried to block the nomination of a presidential appointee based on wanting to

change the agency”; Brown added that the GOP’s “first loyalty is to Wall Street banks.” Congressional opposition was acknowledged as not being based on ideological grounds, not the nominee’s qualifications; the real problem was to rein in the Washington regulators. ⁴¹ Thus, a new law to improve consumer protection, passed by Congress and signed by the president, was blocked; Senate Republican membership rejected the proposed director because they disagreed with the content of the new law. ⁴² In a New York Times Op-Ed piece entitled “Obstruct and Exploit,” Paul Krugman points out that the administration’s proposed 2011 American Jobs Act was designed to stimulate the economy with tax cuts and expenditures designed to address state and local unemployment; the consulting firm Macroeconomic Advisers predicted it could potentially add 1.3 million jobs by the end of 2012. This would have counteracted the 571,000 losses in government employment as the private sector was gaining 4.6 million jobs. ⁴³ The Republicans blocked the bill and subsequently criticized the administration for not creating jobs, blaming the White House for the country’s lack of economic growth. The same political strategy created the major issue of avoiding financial default by the congressional agreement on across-the-board budget cuts, including a Defense Department budget, which would eliminate thousands of jobs. But those who agreed to the consequences of doing nothing in the past now blame others for the current consequences of not acting. American Democracy on the Ropes Bob Herbert asks, “What is happening to democracy here in the United States? . . . I think it’s on the ropes. We’re in serious danger of becoming a democracy in name only.” ⁴⁴ Accordingly, consider the staggering list of major issues that have become irresolvable over three decades: a declining middle class standard of living; the destructive power of wealth and a corporate elite; an inequitable distribution (of a historic level) of income and wealth; a long-term decline of infrastructure and public education; an inadequate social safety net; demoralized public employees, labor unions, and general population; constant attacks on Social Security, Medicare, and Medicaid; and the worsening plight of the poor. In addition, enormous corporate funding for lobbying activities is excessively influencing the election process and legislation. It is noted that an IMF report in 2010, comparing thirty-three advanced economies, ranked the United States as having only the seventeenth highest degree of a functioning democracy. ⁴⁵ Fundamentally, America’s twenty-first-century societal disarray is a crisis of cultural values within a highly self-oriented, self-indulgent materialistic society. Modernity requires one to contend with rapidly accumulating functional and organizational complexities of business, politics, education, and neighborhoods, and a network of defective local, state, and federal governing agencies. The nation responds to symptoms of significant social ills and large-scale cultural disorder with a shrug of the shoulders and comments such as, “Well, that is just the way it is today.” Lawrence E. Harrison addresses the potential power of culture:

The influence of cultural values, beliefs, and attitudes on the way that societies evolve has been shunned by scholars, politicians, and development experts   .   .   .   . It is much more comfortable for the experts to cite geographic constraints, insufficient resources, bad policies, and weak institutions   .   .   .   . But by avoiding culture, the experts also ignore not only an important part of the explanation of why some societies or ethnoreligious groups do better than others with respect to democratic governance, social justice, and prosperity. They also ignore the possibility that progress can be accelerated by (1) analyzing cultural obstacles to it, and (2) addressing cultural change as a remedy. ⁴⁶ Meanwhile, politicians engage in mindless rhetoric, citing vague, supposedly essential ideologies on social and economic issues and expounding America’s exceptionalism, all the while avoiding the obvious defects of generations of inferior national performance. Depending on one’s vantage point, this catchy phrase of “America’s exceptionalism” could refer to the nation’s GDP, stock market values, Wall Street profits and CEO compensation, NFL quarterback salaries, or the magnitude of political donations during the 2012 presidential election. Scott Shane, in an article entitled “The Opiate of Exceptionalism,” comments that for “the political major leagues… it is impermissible to dwell on chronic, painful problems, or on statistics that challenge the notion that the United States leads the world.” ⁴⁷ He then offers examples of statistics of “chronic painful problems,” which illustrate political candidates’ “aversion to bad news” and “truth-telling,” “a surprising feature of the democratic process.” These statistics representing America’s rankings among economically advantaged countries include thirty-fourth in child poverty, twenty-eight in four-year-olds enrolled in preschool, fourteenth in percentage of twenty-four—to thirtyfour-year-olds with a higher education, forty-eighth in infant mortality rate, first in obesity rate, and first in small arms ownership. Shane also notes that America “trails most of Europe, Australia, and Canada in social mobility.” These issues have been ignored during decades of elections, while taxes have been reduced, government regulations have been eased, the country waged continuous foreign wars, and our society has failed to extend fundamental human rights to all citizens of the world—a collective combination of cultural failures indicative of a corrupt, dysfunctional society on the ropes. Rothkopf comments on the importance of “properly balanced” public-private dynamics for the “well-being of everyone”: If there is one thing that history conclusively shows, it is that unlike some dimensions of the battle between church and state, which was in fact over ultimate supremacy and could not end in a tie, the public and private sectors are—when properly balanced—complementary halves of a whole. They may often be rivals, but they are also essential to each other and to the wellbeing of everyone. ⁴⁸ Chapter III America’s Socio-Economic Stagnation : Debilitatin g Complexity and Misuse of National Wealth

After the Great Depression, government succeeded in regulating the financial sector, producing almost four decades of financial stability and rapid growth, with banks focusing on lending, providing the money needed for the rapid expansion of our enterprises. Government helped make markets act the way markets are supposed to function, reducing the scope for fraud and consumer deception and enhancing competition. But beginning with President Reagan and continuing through President Clinton, government stepped back, the deregulation led to instability; with less oversight, there was more fraud and less competition. ¹ Joseph E. Stiglitz The evolution of American capitalism has produced national wealth of historic proportions and an equally unparalleled, enhanced quality of life for most Americans. However, this remarkable and unprecedented socioeconomic success story has also accumulated a vast abundance of seemingly irreconcilable societal issues, conflicts, dysfunction, and destructive behavior. By the twenty-first century, an expanding urban/suburban blight, political corruption and paralysis, excessive wealth disparities, environmental degradation, and monopolistic business practices have become unsustainable and corrosive influences on the nation’s quality of life, economic growth, and social stability. However, the response to this intense, wide-ranging cultural degradation is often a nonchalant, “It is what it is!” American society, repeating the pathways of past great civilizations, has systematically migrated toward more intense levels of ruthless economic competition, self-serving individualism, greedy materialism, and unbridled consumption of national resources and a loss of ethics, cohesion, and compassion. Accordingly, the lesson of history is that when societies evolve beyond mere survival to significant prosperity, they inherently accrue some degree of counterproductive human behavior and negative societal consequences. This is most spectacularly illustrated by the flawed, unprincipled, and rapacious behavior of the investment industry, aided and abetted by unethical politicians, corrupt government regulators, and inept credit rating agencies, all of whom played key roles in precipitating the global financial and economic crisis associated with the Great Recession. Clearly, corrective measures are needed so private and public sectors can overcome such predictable human shortcomings and institutional failures in order to avoid repeating such occurrences, principally the abuse of power and authority. However, in the case of the post-Great Recession era, many of those who initially contributed to and benefited from the crisis within the corporate-political alliance of Wall Street and Washington remain in this sphere of influence, with some switching roles between corporate and public entities. Consequently, whether for better or worse, the social order continuously creates its organizational structures, processes, and functions by increasing coordination, oversight, and regulation; these changes contribute to a perpetual expansion of cultural complexity, disorder, and anxiety, approaching chaos. Struggling with the Forces of Cultural Complexity

Humankind strives to maximize the effectiveness of its processes of existence by planning for and maximizing desirable outcomes, while anticipating minimal negative consequences. However, these processes, while creating desirable elements of order and socio-economic progress, also produce a more convoluted way of life and greater human anxiety and confusion. Conflicting societal outcomes represent the normal, typical cycle of creating pockets of systemic cultural order intended to achieve socioeconomic advancement while concurrently generating undesirable elements of cultural dysfunction, disorder, and waste products. Consider, relative to forty years ago, the complexity of the processes and stress levels of conducting personal business with the state division of motor vehicles, the Internal Revenue Service, customer assistance departments of major businesses, and utility and credit card companies. It is instructive to examine how a society’s basic systems come into existence and how they mature, multiply, and contribute to a culture’s successes, shortcomings, and failures. As an illustration, the modern world of science is a successful cultural subsystem with profound, long-term socioeconomic ramifications. The natural sciences spontaneously and continually expand the depth and breadth of information and knowledge, creating numerous academic disciplines, subdisciplines, and interdisciplinary research areas. Scientific innovations have created elegant and intricate tools to further explore and comprehend intriguing concepts in the natural world; scientists use these tools to create new commercial applications, with the potential for increasing economic prosperity and improving our wellbeing. The oil business has evolved from processing oil that literally seeped from the ground to drilling beneath the earth’s surface and under the sea, thereby making the economic advances of the last century possible. Correspondingly, the number and scope of general research investigations continuously expand at a rate dependent on available financial and human resources, capabilities, and needs. In particular, the twentieth century witnessed dramatic increases in the number of scientists; funding for facilities, equipment, and basic research; and methods to rapidly disseminate scientific accomplishments. As a result, scientific advancements and the resulting engineering, computing, and technological applications have catalyzed our historic prosperity, but at a substantial financial investment by government and the private sector. Conversely, it should be noted that scientific progress, by virtue of creating additional knowledge, wealth, and advanced technologies, has systematically contributed to negative consequences like pollution, war, natural resource extinction, genocide, and substantive ethical and moral conflicts. Such undesirable by-products of human advancement are inherent outcomes of human progress. Hence, typical societal processes responsible for human progress and satisfaction create some degree of undesirable and unanticipated events: cultural complexity, social disorder, and waste. Appropriately, society continually assesses the extent and the rate of its scientific development, associated financial costs, and value of research outcomes toward human advancement.

At the micro-level, representing the vast number of everyday human activities, the operation of an automobile illustrates the basic idea that all humanly conceived processes, while accomplishing desirable outcomes, inherently generate undesirable outcomes. Barring an accident or a traffic ticket, drivers arrive at their desired destination with some wear and tear of car parts, consumption of fuel, and personal fatigue (and perhaps toll expenses). During the drive, gasoline provides chemical energy, which irreversibly transfers mechanical energy to the engine and wheels in order to propel the car on its journey, during which gaseous residues of the fuel’s combustion, including water vapor, escape as by-product exhaust. Accordingly, all humanly created processes require energy and are managed (for better or worse) according to human behavior and the laws of science, as modified by the forces of nature. At the macro-level, the social, economic, and political processes that make up society’s systems of survival require energy; these system, in their totality, are mechanistic and complex (where “complex” is defined, understood, and appreciated in a scientific context). Thus, the world of science and the process of scientific inquiry, as a major segment of society, provide an illustrative example of the complex systems of nature and of those created by humankind. Max Planck (1858-1937), referring to the history of scientific progress, stated, “With every advanced concept the difficulty of the task increased” (Planck’s principle of increasing effort). Henry Adams (1838-1918) recognized that the normal evolution of scientific knowledge was inherently an exponential growth phenomenon (Principle of exponential growth). While these statements may appear on the surface to be quite simplistic and obvious, such simplicity can lead to profound and useful concepts. Accordingly, it is recognized that the dynamics of complex systems, as exemplified by the functional, expanding, and sequential processes of scientific exploration, are represented by the mathematical principle of exponential growth. Consequently, an unabated level of scientific advancement inherently requires a continuous, exponential increase of investment resources. In practical economic terms, this translates into diminishing returns from a more restrictive rate of investment of resources. Thus, society’s expectation from the scientific community of an uninterrupted rate of scientific progress, capable of maintaining a healthy, growing economy of globally competitive goods and services, will intrinsically require an exponentially increasing investment of national resources. Significantly, since the 1980s, America’s politicians and corporate leaders have ignored this the need to continuously fund national research and development programs, which are necessary to maximize new scientific knowledge and related applications in technology and engineering to support vital segments of an expanding economy. Politicians favor lower taxes, and corporations favor greater shareholder returns and executive compensation, and the public doesn’t object. Most important to this discussion, the historic development of science, while occupying a narrow segment of society, offers a microcosm of the essential processes and mechanisms of a society’s total existence. That is, the nature of the scientific community’s developmental processes is fundamentally no different from those of other segments of society; all are dependent on

available resources of wealth, energy, and people and on human wisdom, values, and behavior. In the broadest sense of a total society, maintaining socio-economic progress relies on continuous advancements in knowledge, creativity, innovation, general research skills and tools, financial and business strategies, and production equipment and facilities. Accordingly, a social order must continually and successfully develop new opportunities to regenerate and invest the national wealth, overcoming major socio-economic and political issues. This objective requires implementing more relevant and dynamic organizational structures and operational functions over time, with a corresponding exponential rate of investment of financial and human resources. During the last three decades, America has miserably failed to meet these resource investment requirements for a continuously advancing social order that highly values and respects the well-being of its general population. The mathematical principle of exponential growth expresses the necessity of a society investing to expand its socio-economic development. This principle can be illustrated by the growth of microorganisms in a laboratory experiment. The number of microorganisms in a culture will grow at an exponential rate, not at a linear rate, until the essential nutrient is exhausted. The first organism splits into two organisms that each split to produce four, and so on. Likewise, a nuclear chain reaction exhibits an exponential rate of neutron production. Each uranium nucleus that undergoes fission (i.e., decays) produces multiple neutrons , which may be absorbed by other uranium atoms and create a cascading effect of neutron production until all uranium atoms are depleted. Whether it is the growth of microorganisms, the mechanism of a nuclear chain reaction, or the more complex functional processes of a social order, the rate of activity will gradually decline and eventually approach zero, if and when there is a continuous reduction or complete absence of necessary resource materials. That is, if the requirement of an exponential rate of resource consumption is not met. Likewise, if certain environmental conditions change or inadequate human management persists, the negative feedback will become a potentially debilitating factor. To emphasize and summarize, this mathematical principle of exponential growth is fundamental to the science of complex systems and, as such, is applicable to the processes of a social order’s consumption of wealth, energy, human and other natural resources; it is required to maintain the constant, exponential rate of cultural development. This raises three very significant questions for Americans to consider in the midst of a very chaotic post-recessionary period. First, since societal processes inherently change at an exponential rate, the question arises as to what percentage and to what degree are human beings mentally and emotionally able to keep up with the expanding realities of modernity? Second, what are the evolving human needs, adjustments, and costs for society as a whole to keep up with the education and social services for people to meet the changing home, workplace, and community responsibilities?

Third, why would it not be expected that city, county, state, and national functions and public expenditures should continually require an exponential rather than a linear rate of energy and tax revenue consumption? This is a mathematical requirement of meeting a nation’s fundamental investments in progress in order to achieve and maintain maximum economic growth and the public’s expanding expectations for advancements in military capabilities, public education, infrastructure updates, basic and applied research, expanded financial protection for consumers, and an improved personal and societal sense of well-being. Thus, as a society grows and matures, the totality of its social, economic, and political functions inherently expands at an exponential rate, as does its costs. The inability of meeting this financial challenge via sufficient growth capable of providing adequate tax revenues diminishes the scope of public programs; the effectiveness of social benefits; and investments in technology, science, communication, education, and transportation. Historically, failing this challenge has not been a recipe for economic and social growth. And America has surely failed this challenge; during the last three decades, its growing national wealth has been diverted to provide historic wealth for a few, rather than being utilized to maintain the momentum of the socioeconomic gains from the 1960s and 1970s, which benefited the general population. Additionally, this misuse of national wealth in not collecting sufficient tax revenues, as a percentage of GDP, for national investment in public programs and social benefits, has stalled and hollowed out the middle class economy, essentially prohibiting essential future investments. This judgment that the United States collects insufficient tax revenues, relative to GDP, is supported by the fact that the nineteen other richest nations in the world all collect more taxes as a percentage of GDP; not so coincidentally, they all rank higher in achieving a societal sense of general well-being. Complexity and Lack of Resources: Contributors to Economic Stagnation The civilization studies literature recognizes that throughout history, societies have experienced protracted periods of inadequate resources due to self-inflicted, excessive consumption and debt, avoidable (and unavoidable) wars, and natural disasters, all of which have led to dangerous rates of negative economic growth and to socio-economic breakdown and stagnation. Toynbee’s concept of these sequential stages of societal degradation, emanating from a “time of troubles,” ultimately leads to cultural “ossification,” as in ancient Egypt after the fifth century AD, “rejuvenation,” as represented by modern China, or “collapse,” as symbolized by ancient Rome. Kroeber describes periodic irregular patterns of cultural growth and decline as sequential “pulses,” “lulls,” and “regressions.” However, these fluctuations that are often observed in maturing societies are unpredictable and elusive. American history provides illustrates of such fluctuations and transitions. The Gilded Age of the 1870s and 1880s represents a pulse of rapid economic growth followed by a regressive period leading to the Panic of 1893, which

was then followed by the pulse of America’s First Progressive Era, which lasted from the end of the 1890s until the 1920s, culminating with the Great Depression. The Second Progressive Era, from the late 1940s to late 1970s, provided a pulse that included the equitable sharing of the nation’s new wealth among all income segments. However, beginning in the 1980s, the nation began generating wealth inequalities of historic proportions and began a regressive economic period, culminating in the 2008-2009 Wall Street financial collapse and the Great Recession. Importantly, each pulse of economic growth paralleled an increasing, undue influence and ultimate domination of political parties and governance processes by wealthy individuals and major corporations, utilizing their vast financial and human resources to corrupt society on a grand scale. Consequently, economic transitions of lulls to pulses, while successfully producing net economic growth, increasing national wealth, and expanding greater international influence, also inspire destructive behavior, unwise judgments, faulty values and ethics, and the accumulation of regressive societal elements that contribute to economic lulls (i.e., socio-economic stagnation). These periodic fluctuations between the extremes of economic lulls and pulses correspond to Walter Lippmann’s “ drift ” and “ mastery .” Currently, America is frantically searching for the next progressive era of mastery amid a sputtering economy, but the United States is being outdone by emerging nations experiencing impressive economic pulses, their first Gilded Age. History suggests that the best measure of a country’s stewardship, one that addresses how effectively a culture transforms into renewal, mastery, and longevity, is the degree to which it abides by democratic principles; ideals of social justice and the public good; and respect for diverse moral, spiritual, and political views. While acknowledging the major importance of human cultural values and management capabilities in determining the degree of economic success and general satisfaction of a society’s socio-economic system, a continuous flow of available wealth into the economy is an absolute must. Therefore, it is instructive to examine the consumption of wealth, energy, and human and natural resources required by complex processes that constitutes a society’s social, economic, and political systems. Recall the automobile journey that inherently required numerous chemical and physical processes, which consumed energy and money, and whose safe journey depended on disciplined judgments, attitudes, and actions. If this journey had been a business trip, perhaps a profit could have been realized. This activity required the consumption of energy as mandated and controlled by the laws of physics, as the car engine burns fuel. These concepts, representing Mother Nature’s rules, are also extremely important in comprehending why nations undergo “fluctuations of cultural vigor” and “with successful development… become exhausted.” ² When the gasoline in the car and the available wealth and human resources of a nation are depleted, both the car and the society stop functioning. The hypothetical car journey took place within an organized society that had, over time, created an increasing degree of orderliness including physical components like roads, bridges, and gas stations; functional

systems like the interstate highway system; and social rules of conformity such as traffic law and safety regulations. Likewise, but on a grander scale, a nation’s social, economic, and political systems create and utilize such societal orderliness to provide a safe and satisfying human existence, while acknowledging that disorder is inherently produced as well. To emphasize an important concept, this transition from order to disorder pertains to the small-scale operation of a car trip, but more broadly, to all of society’s processes by which humans conduct their daily activities, during which numerous desirable and undesirable individual and societal outcomes are formulated. This is a basic rule of nature for any process that requires the consumption of energy and is defined by the principles of thermodynamics, more specifically by its entropy parameter, which is sometimes referred to as “the degree of mixed-upness” of a system. That is, how mixed up is your world, what percentage is orderly and satisfying and what percentage is chaotic, wasteful, and agonizing? Reality is a mixture of both. Society’s undesirable by-products, even within a functioning social order, such as poverty, crime, and emotional stress, are products of societal entropy, which flourish even within a prosperous, stable nation. Such consequences intensify and accumulate over generations, particularly within major urban areas, as the number of social and economic functions and their complexities increasingly affect individuals earning a living, traveling, communicating, raising a family, and complying with governmental regulations. The products of physical and chemical degradation of matter such as fuels and raw materials, material entropy production, are also inherently and continuously generated by society’s activities, which parallel the creation of desirable outcomes. These include residual gaseous, liquid and solid pollutants, by-products created by processes utilized to acquire and refine raw materials from natural resources, produce the final products, and dispose of waste materials. Examples of current material entropy or residue production issues include accumulating carbon dioxide levels in the atmosphere, which affects global climate; heavy metals deposited in waterways, affecting marine life; and deposits of nuclear and coal fuel residues. The total production of societal entropy plus material entropy, which increases and accumulates with time at an exponential rate, constitutes a major problem, leading to cultural disorder and dysfunction, contributing to environmental degradation, human suffering, and economic stagnation. An innovative initiative to resolve San Francisco’s traffic congestion offers an example of creating order within a disorderly urban society. ³ People in that city had difficulty finding parking places, significantly increasing traffic congestion. City officials estimate that drivers seeking to park their vehicles generate 30 percent of all downtown congestion and may spend up to twenty-five minutes finding a parking spot. A $20 million project, SFpark, is designed to reduce congestion utilizing a cell phone app that can pinpoint areas of available parking. This is accomplished with wireless sensors for 7,000 parking meters and for 12,250 parking spots within city garages to provide information within seconds of a parking vacancy. A University of California, Los Angeles study found that within a fifteen-block district of Los

Angeles, drivers accumulated about 950,000 miles a year searching for a parking place. Use of the cell phone app could decrease drivers’ stress, wasted time, air pollution, and energy consumption. Merchants could project increased revenues from shoppers and tourists having more time to spend money. This SFpark creation is an example of the expenditure of energy and money to create an additional useful, orderly system from a less desirable state of greater disorder. Importantly, this is the reverse of the car’s fuel being burned during its journey and being converted to residue gases. That is, the more orderly arrangement of liquid fuel molecules contained in the gas tank is transformed to a more disorderly molecular system of random gases exiting the exhaust pipe and in the process yields energy to propel the vehicle. San Francisco’s project is representative of society investing in processes, at some real cost, to create and maintain a functional system via the consumption of energy, wealth, and human and natural resources in order to create a more orderly society and manage undesirable disorder (some of which is manmade). Most importantly, this project represents one small, minor effort to reduce societal complexity, which is suffocating humankind’s capability to tolerate the time and stress of escalating challenges and responsibilities of work, family, and community. Finally, consider this small SFpark project being expanded to the extent of becoming the single default option for parking in all of downtown San Francisco. Rather than individuals relying on their own skills and techniques to find a parking spot, all could come to rely on the GPS-based city system (perhaps an excessive level of created orderliness). Max Weber describes the ramifications of a society creating such large scale, extreme levels of orderliness within a rational system of administering a modern society, which ultimately creates major unresolvable issues and problems. ⁴ He defines the concept of “rationalization” as the process of ordering and unifying systems of ideas and interests derived from cultural traditions and motivated by an underlining tendency toward order as a primary human objective. This requires the specification, clarification, and systematization of ideas and normative controls and sanctions applied to a hierarchical social order. Consequently, a more mature society experiences a continuously increasing, higher order of societal complexity as a normal byproduct of cultural change and, at some point, creates a high degree of orderliness sufficient to gradually reduce the usefulness of operational functions to the point of becoming ineffective. The breath of responsibly of the federal government and, more specifically, the ineffectiveness of Congress and federal tax policy come to mind. Weber views administrative bureaucracies as being created by the application of rational principles such as impersonal and impartial enforcement of appropriate laws and policies. However, the bureaucracy ultimately takes on a life of its own, becoming increasingly hostile, irrational, ineffective, and inefficient in its execution of the rationalization principle by virtue of the variables of size, complexity, inflexibility, and an authoritative mind-set. The abused, frustrated participants of such a system ultimately develop a negative and noncompliant attitude toward such

complex, inefficient, dysfunctional, and overbearing controlling practices that no longer achieve their originally intended purposes in a realistic timeframe. As a result, competition among business entities becomes chaotic due to the incoherent complexity of ineffective and unresponsive institutions and a societal infrastructure intended to promote efficient free market forces, economic growth, and productivity. America’s current antigovernment, anti-altruism, and anti-compromise politics come to mind. Anson Rabinbach, relying on Weber’s “concept of rationalization,” reflects on the loss of societal integrity, efficiency, trust, and coherence: In this view, the formal rigidity and rule-bound modern bureaucracy; the division of labor and the rise of complex managerial strategies; and the impact of commercial culture reduced traditional ways of living and interacting to quantifiable relationships, subverting ethics, values, and universal norms. ⁵ The consequences of rationalization become signs and symptoms of a society’s illness, not its root cause. These symptoms of institutional and cultural degradation have come to be expected from an industrialized society’s continuing success and expansion, as exemplified by the late twentieth-century history of General Motors and more recently by America’s major “too big to fail” financial institutions. The nation’s home mortgage bubble and global banking network illustrate Weber’s organizational, psychology-based concept of the ultimate ineffectiveness of bureaucratic institutions and the associated “subverting ethics, values, and universal norms.” This equally applies to America’s stealth politics and governance system, where a prohibitive degree of complexity undermines the processes of selecting candidates for public office; financing elections; proposing, blocking, and passing legislation; and interpreting, monitoring, and enforcing existing laws. Realities and Costs of Creeping Societal Complexity It is a mathematical fact that successful, mature nations require a continuous proliferation of elaborate, convoluted, and costly fundamental institutions and processes in order to propagate continuous advancement and maintain societal stability. Culture change is as inevitable as the passage of time and, if not positive and progressive, inherently evolves into cultural stagnation or decline. Accordingly, there is a dramatic increase in the challenges and budgetary costs to continue abiding by the democratic principles of social justice and common cause. After World War II, the United States began its rapid ascent to become the century’s premier global economic and military power. The 1960s established a foundation for the next fifty years based on fluctuating, but steady, economic progress, which required extensive private and public investment and a constructive balance of power between the two. A review of the 1950s through the 1970s provides insights into a successful publicprivate relationship that maximized the nation’s economic potential and the strengths of capitalism to create great wealth, while increasingly achieving the ideals of democracy and providing prosperity and well-being for most citizens. It was also a period when safety net programs for children, the

elderly, the unemployed, the chronically ill, and others in need of assistance increasingly became a reality, but at a substantial national cost. Nevertheless, the cost was an important element in sustaining economic growth and social stability. The spirit of political compromise, social compassion, civility, and common good was alive and well. From the 1960s to the late 1970s, the nation’s record prosperity was equitably shared with investors and the working class; Americans broadly benefited from new social programs including Social Security, Medicare, Medicaid, and food stamps. However, during the 1970s and 1980s, America’s corporations and wealthy citizens began influencing Washington politics with their money to acquire a greater share of the national wealth via significant legislation, including changes in federal tax policy, which halted decades of increasing wages and benefits for middle class workers. Additionally, Big Money’s influence supported legislation to erode social programs and reduce the cost of government, thereby successfully contributing to additional corporate profits while further reducing the wellbeing of a large majority of Americans. Herein lies the seed of the nation’s twenty-first-century political polarization between the Republican party, overwhelming dominated by older and wealthier white voters, and the Democratic party’s melting pot of Americans, as demonstrated by the 2012 election results. This is the subject of chapters VII and VIII. The nation’s current political polarization gap, which has evolved since Civil Rights legislation, represents a southern-led conservative movement intended to counteract America’s rights and freedom movement of the last half century. One of their primary targets is entitlement programs, which has come to be characterized in a negative light, with recipients being designated as deadbeats and failures, contributing to an “entitlement bloat” and a “socialist rip off.” As illustrated in the last chapter, surveys show that many people who actively attack government entitlements, subsidies, and benefits are actually recipients of some form of assistance, but they either don’t know it or are unwilling to acknowledge it. Accordingly, it is informative to compare and contrast the political rhetoric and legislative initiatives of the constructive attitudes toward social programs of the post-Depression era and with the negative mentality of the post-Recession era. Marmor and Mashaw note, “Where politicians once drew on a morally resonant language of people, family and shared social concerns, they now deploy the cold technical idiom of budgetary accounting.” ⁶ In June 1934, President Roosevelt stressed “the security of the men, women and children of the nation first. All Americans… want some safeguard against misfortunes which cannot be wholly eliminated in this manmade world of ours.” But in February 2010, President Obama charged his National Commission on Fiscal Responsibility and Reform to “improve the fiscal situation… achieve fiscal sustainability over the long run” and address “the growth of entitlement spending.” In 2011, Congress reduced federal spending and established a super committee charged to reduce the deficit by at least $1.5 trillion over the next decade. “The conversation is now about the federal budget, not about the real economy in which real people live. If a moral concept plays a role in today’s debates, it is only the stern proselytizing of forcing the government to live within its means… .

Programs of social insurance have become ‘entitlements’ . . . a sinister threat to our national well-being.” ⁶ The highest priority of the current Washington political discussions is to what degree the wealthiest Americans should be excessively rewarded as job creators so that they will continue to contribute heavily to both political parties and provide some meager trickle-down income for the lower 90 percent of the population. Reviewing the priorities and the balance of public expenditures for investment versus entitlements is the mission of the Third Way, a “centrist Democratic” think tank. They report that during the 1960s, about thirty-two cents of each dollar of federal revenue, excluding interest payments, went to “investments”; fourteen cents went to “entitlements.” By 2012, only fifteen cents of each dollar went toward investment and forty-two cents to entitlements. “By 2030, when the last of us boomers have surged onto the Social Security rolls, entitlements will consume sixty-one cents of every federal dollar, starving our already neglected investment and leaving us, in the words of the study, with ‘a less-skilled workforce, lower rates of job creation, and an infrastructure unfit for a twenty-first-century economy.” It is also noted that the working-age population will increase by only 20 percent over the next thirty years while the older population expands by 100 percent. ⁷ But is the continuing, unsustainable federal budget deficit due to excessive expenditures, unwise federal budget priorities, excessive wealth inequality, or a tax revenue shortage that has stalled a middle class economy? It appears to be all of the above. Importantly, this analysis is based on a 1960s dollar of federal tax revenue versus a 2012 dollar, ignoring the fact that in the 1960s the United States collected tax revenue relative to its GDP that was comparable to the other leading industrial nations, whereas in 2012 it ranked near the bottom. Also, consider the following: First, the only entitlement growing faster than the GDP is Medicare; second, Social Security has not contributed to the current deficit; and third, with the exception of defense, domestic discretionary spending has appreciably declined. Fourth, in view of reduced state and local expenditures, total spending on education, infrastructure, and basic research has declined from 12 percent of GDP in the 1970s to less than 3 percent in 2011. Fifth, the World Economic Forum ranks American infrastructure twenty-fifth in the world, compared to eighth in 2004. It would appear that the continuing budget problem is due to a politicized tax policy, which generates insufficient revenue to adequately fund a global leader. ⁸ Thus, the context for the national budgetary debate should include dealing with the unsustainable public debt; inequitable tax policies that generate insufficient revenue; infrastructure modernization; adequate funding for public education and health care; and an appropriate balance of long-term private and public investments in the economy. However, in recent time, extreme cultural elements of anti-government and anti-tax attitudes, selforiented individualism, and greedy materialism have prevented rational solutions to the nation’s basic financial and economic problems. For example, there are angry and polarizing discussions around the nation

focused on budget cuts but little is said about the appropriate benchmarks for adequate tax revenues, income inequality, and social services expenditures commensurate with democratic principles of social justice, the common good, and an acceptable level of public debt. To this point, Americans have been in denial for two decades; low tax rates and inadequate revenues exist within a climate of greed and the macho individualism of “I earned it and I should be able to keep it.” This mentality grips the nation and interferes with the creation of real solutions to welldefined economic and financial problems. Likewise, America is in a state of denial about its dismal international rankings in economic, financial, social, and educational categories, which began three decades ago. This severe decline in national performance is the direct consequence of reduced tax rates for the wealthy, which produced inadequate federal revenues and massive public debt. The Price of Civilization and Achieving the Public Good An imperative corollary to a rational discussion of balancing adequate tax revenues with public spending is a realistic assessment of a nation’s ability to secure a given amount of financial and human resources to sustain the momentum of efficient and effective socio-economic and governance systems. It is noteworthy that fifty years ago, the United States and European nations collected about the same ratio of total taxes as a percentage of GDP: about 30 percent. However, since 1965, this US percentage has remained constant; that is, no increase in the percentage of GDP devoted to taxes, while European nations increased their percentage from 1965 to 2009, on the average, by 10 percent. ⁹ Consequently, these nations have had more funds to invest in such public services as universal health care, public education, family assistance, and infrastructure improvements. In 2010, Europe had more positive outcomes than America in indicators of individual well-being, related to poverty, imprisonment, health, and life expectancy, as governments assumed a greater role and responsibility for such outcomes. Total GDP and corporate profits are not their primary measures of national success; their top priority is the well-being of the average citizen. As a consequence, in 2010, America rankings (based on percentage of GDP) was twenty-third out of the twenty-four wealthiest nations for the largest budget deficit, twenty-second of twenty-three for the lowest tax revenues, and lowest social service spending, all consistent with achieving the lowest tax-to-GDP ratio from 1965 to 2009 of this group of nations. ¹⁰ The United States suffers from inadequate tax revenues, which prevent it from achieving the same quality of well-being of these leading European nations.

In the book The Price of Civilization by Jeffrey Sachs, the chapter entitled “Paying for Civilization” rhetorically inquires, “How do Canada, Denmark, Norway, Sweden, and other countries manage to educate their young, fight poverty, modernize their infrastructure, enjoy a life expectancy well above America’s and still maintain a budget that is more in balance than America’s?” ¹¹ Based on his analysis, Sachs concludes, “The divergence between the United States and Europe reflects a divergence both of fiscal means and fiscal ends.” ¹² The percentage of tax revenue relative to GDP of the world’s twenty richest countries serves as a suitable benchmark for the US to assess the appropriate level of revenues distributed among budget priorities and the wisdom of public spending on a social safety net, “earned benefits” and other health and social services, and payments on debt. This rational approach could serve as a starting point for the US discussion of a benchmark for the appropriate level of taxation, which currently is a politically charged conversation that elected officials would rather avoid. Astoundingly, since the late 1980s, America’s irrational fiscal policies have significantly reduced individual and corporate tax rates and total tax revenues relative to GDP, while the nation was engaged in two off-budget wars and suffering from record public debt, continuous budget deficits, and declining global rankings in providing for the well-being of the average citizen. A most compelling finding from the work of Wilkinson and Pickett is the correlation between a nation’s increasing income inequality and health and social problems. In other words, greater income equality makes a society stronger. ¹³ It should be noted that in 2010, Luxembourg, Norway, Switzerland, Denmark, and Sweden achieved higher GDP per capita than the United States. ¹⁴ Also, democratic governments, whether slanted toward conservative or liberal philosophies, are responsible for monitoring and controlling this income inequality. Political systems are responsible for creating and enforcing rules that affect the distribution of a society’s wealth, but the extent to which individuals contribute to creating national wealth relative to their incentives and rewards is always an issue. An efficient and effective economy, by definition, must be fair and beneficial to most within a society in order to promote and achieve long-term social cohesion, common cause, and social justice; otherwise, an economy of unbalanced production and consumption will stall economic growth. In 2011, the International Monetary Fund (IMF) reported that income inequality had a negative effect on a nation’s economic expansion. Long periods of significant growth or “growth spells” were “much more likely to end in countries with less equal income distributions… regardless of what other variables were in the model or the definition of a ‘growth spell.’” ¹⁵ Robert Putnam relates growing economic inequality to declining “social connectedness and civic engagement.” In terms of the distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a century   .   .   .  

. Those same decades were also the high point of social connectedness and civic engagement. Record highs in equality and social capital coincided   .   .   .   . Conversely, the last third of the twentieth century was a time of growing inequality and eroding social capital   .   .   .   . The timing of the two trends is striking: Sometime around 1963-70 America reversed course and started becoming both less just economically and less well connected socially and politically. ¹⁶ Appropriate to the discussion of desirable and acceptable degrees of income inequality within a nation or a business is the question of assuming that large competitive incentives and rewards will stimulate and maintain a thriving, profitable economy or an individual’s superior performance. Workplaces that depend on enhanced financial incentives often promote unhealthy competition, which is not in the best interest of the organization. Recall Wall Street’s financial collapse. History has demonstrated that relative income, not absolute income, is the key to maintaining long-term economic growth and social stability. Those nations with only a small degree of income inequality have greater long-term social and economic stability. Thus, measured rather than excessive marketplace incentives and rewards are more conducive to long-term economic growth and social stability. A fundamental conflict can exist between individual and group incentives, as human values and ethics and group priorities and objectives affect the degree to which competitive forces will share in business profits, diminishing “social connectedness and civic engagement.” Resource Challenges and Political Liabilities All socio-economic systems constantly face two specific major challenges of survival. First, they must acquire and utilize sufficient wealth, energy, and human resources to support an exponential rate of expansion, which is inherent to ever-changing economic growth and social progress. Second, their national wealth investments must provide sufficient returns to provide enough capital to reinvest in critical sectors of the economy, which will enable them to maintain the momentum of socio-economic advancement. However, too often capital becomes overzealously focused on short-term or risky investments and on producing luxury goods at the expense of more disciplined, long-term investments. As a result, national wealth may become dangerously overcommitted to investment categories that are incapable of maintaining a sufficient flow of capital necessary to sustain economic growth. On a national scale, such investment strategies and priorities of capital allocation run the risk of neglecting critical sectors of the overall economy. This pertains to sound, adequate government investments in support of commerce and the well-being of people as well as to wise private investments that create profits and sufficient reinvestment capital. Accordingly, in recent decades, investors have been attracted to quick profits promised by technology stocks, sub-prime mortgage securities, and other services associated with the nation’s addiction to continuous entertainment, exemplified by social communication with friends, family, and celebrities. In mid-2011, Facebook was valued at $100 billion, Twitter at $8 billion, Groupon at $30 billion, Zynga at $20 billion, and LinkedIn at $8 billion. However, these Internet and social networking companies employed

fewer than 20,000 people. ¹⁷ In essence, gambling on large returns from risky, nontraditional products and services has become more financially appealing than settling for modest returns from traditional investments in the manufacturing sector. The national mood has turned away from the federal government investing in an adequately educated workforce and supporting research, infrastructure projects, and the health and welfare of all citizens; this change is reflected in record low tax revenues as a percentage of GDP. Greed is a strong motivator. Thus, the balance between the private and public sectors of critical, cooperative investments in area of vital importance to the long-term economy has been eroding for the last three decades, as has the balance between labor and business. Government has failed its leadership, monitoring, and regulatory roles. Traditional considerations of investment decisions, based on track records of profits, capital reserves, employment profiles, and competitive markets, have given way to risky schemes of untested creative ideas, which are contrary to sound business practices that contribute to a long-term, stable, and advancing economy. Accordingly, the change in the nation’s private investment priorities and the reduction of public investment have seriously damaged America’s reputation in research, innovation, and economic developments such as manufacturing, transportation, renewable energy sources, and power transmission (industries that are capable of generating returns on investment capital in the long-term). These types of investment have a higher probability of creating greater wealth value . A nation’s economy may be viewed in terms of its ability to produce essential goods and services of high value so as to generate sufficient profits to provide adequate capital for reinvestment. In a thermodynamic sense, a society may at some point in time become unable to accomplish the magnitude of required useful work (generation of essential goods and services, sufficient profits, and new investment capital) to meet the requirements of the job (maintaining social and economic effectiveness). If a society’s financial burden becomes too heavy relative to the capabilities of its economic engine and available resources, its economic efficiency will be insufficient to meet economic requirements. Economists refer to this condition as declining marginal productivity : too little capital being invested in growth potential to generate sufficient new capital. Joseph Tainter pointed out that “complex societies with large, welldeveloped economies have historically been able to sustain only rather inferior rates of economic growth… a recurrent and seemingly inexorable trend toward declining marginal productivity in hierarchical specialization.” ¹⁸ History demonstrates that mature civilizations have exhibited gradual, steady declines in economic efficiency, resulting in higher ratios of wasted to wisely utilized national wealth and energy resources. Fundamentally, this declining economic efficiency of a maturing social order, not surprisingly, represents the inevitable consequences of Mother Nature’s laws of thermodynamics.

Economic gains require continuous new knowledge, discoveries, and inventions that stimulate and alter the nature of commerce, which are necessary to constructively and gradually transform society. This inevitably faster pace of cultural development necessitates a more intense cultural integration and the networking of more convoluted organizational and functional subsystems. Thus, escalating aspirations for more intense socioeconomic advancement inspires the continual proliferation of more costly and time-consuming bureaucracies, policies, laws, regulations, codes, and societal entitlements. Consequently, the broad scope of a society’s aspirations and initiatives, consuming resources at an increasing exponential rate and lower efficiency, ultimately extends beyond the capabilities of the social order to make them available in sufficient quantity to match the people’s unquenchable appetite. Thus, a society suffering from a declining marginal return on its investment of national wealth finds itself on the slippery slope toward socio-economic stagnation. Tainter said, “The marginal return on investment in complexity is at present the best explanation of collapse.” ¹⁹ In recent decades, an additional economic challenge has been the failure of political parties and the government to meet minimum standards of integrity, ethics, and effectiveness. At both and federal and state levels, politicians have increasingly engaged in piecemeal, temporary financial and budgetary tactics and gimmicks of short-term, Band-Aid financial and economic fixes. Ignoring larger issues having obvious solutions but politically unpopular consequences, politicians fashion defective budgets by utilizing expedient user fees, sin and sales taxes, off-budget expenditures, and debt, while promoting low tax rates as an election-time ploy. This political strategy of avoidance ignores sensible, coherent revenue and expenditure models, rational fiscal priorities, and equitable and progressive taxation. It is more expedient to kick the issue down the road to the next legislative session or, better yet, to the next generation of office holders. Accordingly, mature social orders facing economic stagnation have historically exhibited misplaced priorities for the investment of waning national wealth and embraced questionable cultural values and ethics. Typical characteristics include excessive government expenditures relative to available revenues, unsustainable levels of public and private debt, widespread corporate and government corruption, and large military expenditures. Most notably, America now spends as much on the military as all countries of the world combined (and six times that of China). The United States maintains about 560 foreign bases, some of which have been in existence for decades. Many times, the level of a congressional appropriation for a given program is much lower than the final total cost due to indirect costs to the government that result from ancillary work necessary to complete the task but not funded within the appropriation. As an example, Congress directly appropriated $1.4 trillion for the Iraq and Afghanistan wars for the period from September 2001 through 2012. However, this figure grossly understates the full costs of engaging in these military actions, by about $2.5 to $3 trillion. ²⁰

According to the Eisenhower Study Group, a team of scholars at Brown and Boston Universities, these indirect and long-term additional costs and obligations include • indirect Pentagon support costs ($326 billion), • interest on Pentagon borrowing ($185 billion), • war-related foreign aid (864 billion), • veterans medical and disability payments ($33 billion), • Homeland Security ($401 billion), • war costs through FY 2015 ($168 billion), • guaranteed lifetime health and disability care for 2.2 million veterans through 2051 ($589 billion), and • projected social costs to veterans and their families ($295 billion). Meanwhile, funding for crucial public investments and services has been severely deficient for decades. Programs deemed vital to economic growth and for public services, when initially funded, were later denied adequate funding to function effectively. At the state and federal levels, politicians have sought praise from their constituents by voting for popular new programs and benefits but subsequently ignore the obvious long-term financial implications of these programs. New roads, bridges, technologies, and educational programs require continuing government appropriations, far into the future, but legislative approval of new programs usually lacks long-term fiscal commitment and responsibility. Historically, mature civilizations ultimately arrive at a time when they cannot devote the necessary time, effort, and resources to maintain the level of accumulated societal achievements and to invest in creating further advancements, while maintaining social and economic stability. Accordingly, America’s current financial crisis, economic stagnation, and level of cultural degradation are due to its ineffective management of unprecedented levels of societal complexity and dysfunction and in the failure to make available the level of resources necessary to maintain the momentum and stability of its socio-economic system. In this highly competitive, ruthless atmosphere, cultural values consistent with democratic principles have been abandoned, as the nation suffers from ineffective, deteriorating systems of public education, infrastructure, transportation, and health care. Walter Lippmann identified the resulting human isolation, uneasiness, and fear of this complex, fast-paced social condition, where “we have changed our environment more quickly than we know how to change ourselves.” ²¹ This fast-paced environment, moving “more quickly than we know how to change ourselves,” is exemplified by the nation’s financially suffocating and failing infrastructure: the antiquated electric grid, outdated air traffic technology, crumbling bridges and tunnels, congested interstate highways, underfunded postal services, and obsolete railroad equipment. These

systems illustrate the legislative appropriation scam whereby representatives adequately fund the initial growth phases but cut budgets for maintenance and improvements down the road. Meanwhile, in December 2012, China opened the world’s longest high-speed rail line (1,400 miles long), which cuts in half the time required to travel from the country’s capital in the north to Guangzhou, an economic hub in the south. Unfortunately, over the decades, Americans in large numbers have been seduced by popular but destructive political myths that government is the problem and not the solution to the nation’s ills, that lower taxes create jobs, and that everyone should be able to keep all they earn. This false political rhetoric once again reminds us that economics must be considered in the political context of the times. Consider the extent to which congressional priorities and actions during the spring 2011 legislative session reflected a lack of governing ethics and responsibility. At the time, the nonpartisan Congressional Budget Office projected America’s cumulative federal deficit over the following four years to be approximately $3.8 trillion. In the House of Representatives, the GOP, emboldened by its fall election results and newly won majority leadership, attempted to meet an election pledge by proposing draconian discretionary budget reductions of $100 billion aimed at the lower and middle classes, while refusing to consider tax revenue increases on wealthiest Americans. The House legislation simply ignored the reality of the general rule that, for every $100 billion of deficit reduction, about one million jobs will be lost in the near term. ²² The proposed legislation, which was publicly deemed to be doomed to failure by a Democratic Senate and president, represented a token reduction of the projected four-year deficit and a symbolic political gesture to demonstrate supposedly responsible fiscal management of the people’s money. The House’s political strategy of consuming valuable time to pass such doomed pieces of legislation persisted throughout the 2011 and 2012 legislative sessions, in lieu of working toward consensus and proposing viable legislation to help the nation recover from the economic recession. The House voted thirty-three times to repeal Obamacare, which President Obama was not about to sign. Unfortunately, this political posturing exemplifies how irresponsible, brazen, and unproductive the nation’s political environment has become in the twenty-first century. Ironically, during this legislative session, the nation was relying on the same failed institutions (and many of the same individuals) to solve our economic crisis that were initially responsible for creating it. The GOP supported deficit spending for the 2001 Bush tax cuts for the wealthiest Americans and for large defense expenditures. In 2011, they preferred to reduce appropriations for health, education, social welfare, and job creation, which provide basic assistance for less fortunate Americans in a time of economic crisis, while supporting the greatest income inequality since the Great Depression. Congressional time is overwhelmingly consumed with a misplaced immediacy of reducing expenditures and the national debt, while devoting

insufficient effort to re-establishing the middle class economy, stimulating small business growth, and bolstering employment. In such situations, the projection of panic, the fear of debt, and the need to quickly reduce appropriations is a self-defeating economic strategy. The priority should have been to develop a large-scale joint government-private sector economic program in lieu of austerity budgeting to stimulate the general economy. Addressing the unsustainable national debt is mandatory but requires a viable long-term financial plan that combines reduced spending and increased tax revenues. Austerity measures adopted by England and other European nations during the last four years have been clearly ineffective in stimulating economic growth. In January 2013, a report by the IMF’s chief economist stated that austerity has a depressing effect on weak economies, and the adverse effect is substantially greater than previously assumed. ²³ Additionally, in 2010, the IMF concluded, “We find that longer growth spells are robustly associated with more equality in the income distribution… . Over longer horizons, reduced inequality and sustained growth may thus be two sides of the same coin.” In April of that year, its managing director stated, “Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace.” ²⁴ The views of Nobel Laureate in economics Joseph Stiglitz on income equality and current austerity programs are quite clear: The worst myths are that austerity will bring recovery and that more government spending will not   .   .   .   . History shows that austerity has almost never worked and theory explains why we shouldn’t be surprised by this. Recessions are caused by lack of demand—total demand is less than what the economy is capable of producing. When the government cuts back on spending, demand is lowered even more, and unemployment increases. ²⁵ Great Deformations of a Crippled National Economy David Stockman, director of the Office of Management and Budget under President Ronald Reagan, identified “four great deformations of the national economy” ²⁶ that “led to the serial financial bubbles and Wall Street depredations that have crippled our economy.” First, in 1971, President Nixon, following the recommendation of Milton Friedman, defaulted on the 1944 Bretton Woods agreement pertaining to our international balance of payments. Importantly, the value of international currency then became decoupled from physical matter (i.e., gold, which possessed real value and which had been accepted as an undisputable marketplace standard). Under such a standard of value, currency values do not arbitrarily fluctuate based on behavior or on momentary psychological impulses. Without such a standard, politicians are then able to create irresistible pathways to utilize public debt in lieu of budget cuts, raising taxes, or denying their constituents the desirable services and benefits they desired. The accumulation of paper debt has no real consequences for them during their time in office.

Given Nixon’s action, responsible fiscal stewardship based on financial discipline and constraints were easily and quickly removed as a necessary component of government budgeting. Stockman comments: Once relieved of the discipline of defending a fixed value for their currency, politicians the world over were free to cheapen their money and disregard their neighbors   .   .   .   . Now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve. ²⁶ Second, America’s public debt will grow from 40 percent of GPD ($425 billion) in 1970 to a projected $18 trillion or 40 times the 1970s’ GDP by 2015. This growth was the result of three decades of following the economic philosophy that the free market should set currency exchange rates and that deficits don’t matter, if they result from tax cuts. While in 1981, both parties supported tax cuts matched by spending reductions, the politics of the welfare state during the 1980s brought the return of the delusion that tax cuts will stimulate the economy and reduce deficits. The George W. Bush administration approved $420 billion in nondefense appropriations, a 65 percent increase from the $260 billion budget inherited eight years earlier. Consequently, by 2009, tax cuts had reduced federal revenues to only 15 percent of GDP, the lowest since the 1940s. Third, the gradual evaporation of government banking regulations, culminating with the 1999 repeal of the 1933 Glass-Steagall Act, and the availability of enormous quantities of investment capital for innovative, getrich-quick schemes on Wall Street stimulated wild speculation and excessive leverage within the nation’s financial industry. Total assets of commercial and investment banks increased from $500 billion in 1970 to $30 trillion by September 2008, diverting trillions of investment dollars from a national economy of basic goods and services to speculative wagers on new, and now infamous, Wall Street products. Stockman states, “But the trillion-dollar conglomerates that inhibit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation… . They could never survive, much less thrive, if their deposits had not been government-guaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets.” Stockman’s fourth destructive change is “the hollowing out of the American economy by living beyond our means for decades by heavily borrowing from abroad and sending jobs and production off shore.” The consequences, including the current historic wealth inequality, are “not the market’s fault. It’s the decaying fruit of bad economic policy.” ²⁶ In the summer of 2011, the heated congressional discussions of whether to increase the federal debt limit or let the government default conveniently ignored the point that all such debt is due to expenditures authorized by Congress to be implemented by the executive branch of government. Thus, in recent times, how did the federal debt accumulate so rapidly and why?

In 2000, the federal government had a budget surplus, but since that time, the following policies contributed to the accumulating budget deficits: the Bush tax cuts added about $2 trillion of debt, and the Iraq and Afghanistan wars added $1.1 trillion. Additional budget deficits resulted from the fallout from the Great Recession that reduced tax revenues and the labor force, which necessitated increasing government spending for the unemployed, for stabilizing the financial system, and for stimulating the economy. Amazingly, Washington politicians in 2010 renewed the Bush tax cuts for the wealthiest Americans rather than returning to tax rates of an era of economic prosperity and budget surpluses; they also did not close corporate tax loopholes that permit many corporations to pay little or no federal taxes. When prescription drug coverage for Medicare recipients was enacted during the Bush administration, then Comptroller General David M. Walker referred to 2003 as “the most reckless fiscal year in the history of the Republic.” ²⁷ The total costs of new policies under the Bush administration (FY 2002-2009), which contributed to the accumulating deficit, totaled $5.07 trillion. New costs included the Iraq and Afghanistan wars ($1.469 trillion), tax cuts ($1.812 trillion), nondefense discretionary spending ($608 billion), TARP and other bailouts ($224 billion), Medicare drug benefit ($180 billion), and 2008 stimulus and other charges ($773 billion). These new costs created budget deficits with no offsetting savings from program reductions. ²⁸ The economic recession was a major contributor to the deficit; the deficit did not cause the recession. Any recession will precipitate a reduction in federal and state tax revenues, which increases unemployment and requires additional social program expenditures. Note, if the Bush temporary tax cuts were allowed to expire in 2012, future deficits would have been reduced by about 50 percent, while just continuing the lower tax rate for the most wealthy would have provided about $3.8 trillion of tax revenue over ten years. ²⁹ Finally, contrary to conventional wisdom, nondefense discretionary spending, devoted to foreign aid, education, and food safety, was not a contributing factor to these deficit increases; those items have represented a constant 15 percent of the budget for decades. Throughout the bitter, embarrassing congressional wrangling in 2011 and 2012 over resolving the nation’s increasing public debt and the need to raise the debt ceiling, it was apparent that the public never realized, didn’t care, or had forgotten how the national debt had grown over the last decade. Also, during the public debate, little useful information was gleaned from the vague and misleading political rhetoric from politicians and pundits. First, reason would dictate that prior to embracing theoretical economic models that represent one’s political ideology and personal agenda, it would be wise to acquire an appreciation for the facts of the nation’s budgetary and financial affairs. However, the 2010 through 2012 political rhetoric regarding public policy, taxes, budget and spending priorities, and deficits serves as an unfortunate illustration of how the absence of knowledge and information and the lack of rational thought and integrity contribute to

America’s increasingly dysfunctional political system and to its current severe social and economic volatility. Excessive Wealth Inequality: What is Wrong With Public Policy? Unmistakably, the greatest single contributor to the Great Recession was the dramatic and inequitable shift in the nation’s income distribution over the last three decades, which concentrated wealth in the hands of the richest Americans to an extent not seen since 1928. An important reference point for a more economically desirable and equitable degree of income distribution is the period between 1947 and 1973, during which income rose at the same annual rate (about 10 percent) for all income quintiles, after which the highest income quintile escalated significantly. Accordingly, from 1977 to 1989, the wealthiest 1 percent increased their income by 78 percent from 9 percent of the nation’s total income in 1977 to 24 percent by 1989, owning 40 percent of American wealth. During this period, while the nation’s hourly wage increased by only 7 percent, the two lowest income quintiles (40 percent of the population) suffered a decline in income equivalent to $275 billion per year being shifted from the middle class to the richest Americans. ³⁰ This data should be digested in the context of American productivity increasing by 80 percent from 1980 to 2009. More pointedly, from 1979 to the Great Recession, the top 1 percent of earners received 36 percent of all household income gains, and during the period from 2001 to 2006, this figure escalated to 53 percent. More startling, the top 0.1 percent of earners received over 20 percent of all aftertax income gains between 1979 and 2005, as compared to 13.5 percent of gains that went to the bottom 60 percent of households. ³¹ The extreme disparity of CEO-to-worker compensation ratio that has evolved over almost four decades highlights the inequitable sharing of economic prosperity in America. In 1965, the average CEO of a large US corporation earned about 24 times the earnings of the typical worker, but by 2007 this ratio had risen to 300. ³² This dramatic, inequitable shift in the distribution of American wealth was, in large measure, enhanced by a three-decade, corporate-led political tax policy campaign, whereby the standard tax rate for the wealthiest 1 percent (income above $398,000 in 2007) declined from 48 percent in 1970 to 33 percent in 2004 and for the wealthiest 0.1 percent from 64 percent to 33 percent. In addition, due to tax loopholes, creative tax strategies, and offshore banking, the effective tax rates paid by the wealthiest Americans were reduced even further. Thus, substantially lower tax rates plus dramatically higher gross incomes for top earners resulted in generous increases in net incomes, creating an income inequality of historic proportions. The membership list of the elite Forbes 400 provides an appropriate illustration of the escalating wealth gap in America. In 1992, the wealth of the Forbes group was estimated to be $300 billion; by 2012, it had increased fivefold, to $1.7 trillion. The group paid an average

tax rate of 26.4 percent of adjusted gross income in 1992, but only 19.9 percent in 2009. Members of the 2009 Forbes group had an average income of $202 million, with 25 percent paying a tax rate of less than 15 percent, 50 percent less than 20 percent, and a few at a zero tax rate. During this period, this wealthiest 400 benefited from a dramatic increase in national productivity and a highly friendly tax policy, while the nation’s average hourly compensation was stagnated at the 1974-to-2012 rate. ³³ Meanwhile, police officers, firefighters, social workers, and teachers averaging about $50,000 a year are taxed at the federal rate of 20 percent and are being subjecting to new state and federal government initiatives, which impose stagnant wages, lose of union representation, underfunded retirement systems, reduced education funding, and threatened reductions to Social Security, Medicare, and Medicaid. What is wrong with this picture? The answer is the dominance of unwise, callous public policy based on tenets that greed is a necessary evil to ensure the longevity of a prosperous socio-economic system, that political compromise and social altruism are human weaknesses, and that ethics are adjustable commodities to be modified to coincide with an individual’s best interests. Michael J. Thompson warned against the prospects of “perverted forms of government” in which “the few ruled over the many and the public good was trampled by the wealthy, powerful, and elite.” The Ancients and their Enlightenment heirs believed that preservation of democratic practices “required”   .   .   . not a utopian form of equality but a set of institutions and laws— and hopefully a civic culture as well—that would limit the excesses of wealth and property . ³⁴ This excessive, inequitable, and damaging distribution of wealth is the result of a corrupt public policy engineered by Big Money that has produced a second Gilded Age, more robber barons, and crony capitalism. It is noteworthy that America’s tax revenues, as measured by the internationally accepted standard of the percentage of GDP, are inadequate; in fact, the United States ranks last among the world’s twenty richest nations. Also, over the last decade, corporate and individual tax revenues, as a percentage of GDP, were just 9.2 percent, the lowest level for any ten-year period since World War II. ³⁵ Importantly, the OECD has noted that the United States is one of least effective governments in addressing income inequality, as its tax code does not raise sufficient revenue to adequately fund public benefits needed to stimulate and maximize the purchasing power of the middle class and the poor and to improve the efficiency of the economy. ³⁶ Table 1 compares individual tax payments from 1980 with those from 2010, when most Americans paid less in total federal, state, and local taxes, including sales and property taxes, than they did three decades ago. Congress reduced federal taxes at every income level over the last thirty years, while state and local taxes increased for most Americans, which offset only a portion of their lower federal tax bill.

Specifically, taxpayers benefited from tax cuts in 1981 and 1986 under President Reagan and in 2001 and 2003 under George W. Bush, but prior to the tax Bush cuts, President Clinton, in 1993, partly reversed the Reagan reductions. Meanwhile, during this three-decade period, corporate taxes decline, and the US tax system became less progressive. In theory, America has one of the most progressive tax codes among the developed nations. However, it is also among the least effective in producing an optimum degree of income inequality, capable of providing appropriate incentives and rewards for both investors and workers so as to maximize production levels, efficiency, and profitability. Accordingly, sufficient tax revenues have not been generated as progressive tax codes alone are inherently inefficient at raising tax revenues, and the American government’s legislative and budgetary processes have been strongly influenced by predetermined political objectives and outcomes rather than designed to achieve economic benefits for the nation as a whole. In contrast, other industrial nations have learned what Eduardo Porter claimed in the New York Times : that a “government’s success at combating income inequality is determined less by the progressivity of either the tax code or the benefits than by the amount of tax revenue that the government can spend on programs that benefit the middle class and the poor.” ³⁶ This wisdom is based, first, on the realization that the lower and middle class segments of society are invaluable: they consume products and services, producing business profits and reinvestment capital necessary to stimulate economic growth. Second, in order to maximize this stimulus factor and thus economic productivity and the public good, public policy must incorporate a progressive tax code with private and public social benefits, which achieves an optimum degree of income inequality to reward the job creators while also providing for a general sense of societal well-being. This balanced approach of tax policy and private and public benefits has helped other nations achieve economic growth comparable to the United States while providing superior social and public benefits. As an illustration, the entire budget for cash assistance for families in the United States is only 0.1 percent of the nation’s economic output, while the average of OECD nations is 11 times larger. Ironically, a modified trickle-down economic model that reflects this finely tuned correlation of tax progressivity with appropriate benefits might just work in the United States. According to the OECD, the capitalist democratic nation of Japan and the more socialist democratic country of Sweden have been more successful in providing a higher quality of life for their general populations than the United States. The United States has failed to embrace a similar public policy whereby worker benefits and social assistance from the public and private sectors combine to stimulate and maintain economic growth. This lack of wisdom undermines economic growth; the myopic emphasis on profits for investors and corporate executives hampers the resolution of the public debt and blocks the return of effective government. ³⁶ The failure of the United States to embrace wise economic and altruistic public policies, including governmental assistance as being critical to

stimulate a recessionary economy and maintaining a fair degree of wealth inequality, will block the rejuvenation of its stagnant socio-economic system. Most significantly, the current political era has attracted the most ineffectual and incapable collection of politicians in modern times, which does not give much promise for a reversal of the nation’s current troubles. As with previous Western societies, America has lost its thread of rationality, its ability to finance cultural complexity, and its altruistic cultural values and the ethics necessary to overcome the downward spiral of an “overripe” sensate culture whose zenith has past. Back in 1970, Pitirim Sorokin put it this way: Governments will become more and more hoary, fraudulent, and tyrannical, giving bombs instead of bread; death instead of freedom; violence instead of law; destruction instead of creation. ³⁷ Through different stages of cultural development, complex societies generally proceed from overcoming mild disorder to being barely able to manage intense disorder to finding it very difficult to manage early stages of chaos, ultimately progressing to a point where chaos is unmanageable and uncontrollable. B. G. Brander, reflecting the words of Sorokin, wrote: Sensate culture in its overripe and rotting condition has debased mankind and now is destroying him and his environment as well. Spontaneous forces inherent in the system have stripped it of fundamental values capable of commanding allegiance. This has undermined the culture’s prestige and alienated from it much of humanity. The same forces have robbed the society of former security and safety, militated against freedom, and struck repeated blows at prosperity and material comfort. ³⁸ According to Brander, Sorokin identified three global trends more than fifty years ago. First, cultural creativity was “making an epochal shift from Europe to other parts of the world.” Second, “the modern sensate culture and the people who live by it are suffering progressive disintegration.” Third, “the early seedlings of a new cultural order are emerging and slowly growing,” making reference to the cultural renaissance of Asia. ³⁹ Chapter IV Demise of the Middle Class Economy : Conflicting Economic Theories and Political Agendas If the underlying “fundamentals” are in order—if consumers are subsequently capable of spending and saving resources, if businesses have good reason to invest, if government maintains a fair balance between public needs and fiscal restraint, if the global economy efficiently allocates savings around the world, and if the environment can be sustained—than we can expect healthy and stable growth. ¹ Robert B. Reich After the Great Depression, the United States created a prosperous mixed economy, dependent on markets and government respecting the law of

supply and demand and an equitably sharing of the nation’s productivity among the population. Unfortunately, the post-1980s produced corporatepolitical alliances with a primary objective of enhancing corporate profits and income for the nation’s wealthiest citizens. In the process, socioeconomic opportunities for the masses have been callously suppressed, and the basic principles of democratic capitalism have been trampled as major business and political leaders continue to create power structures representative of a past era of capitalist oligarchy. Marriner Eccles, a Utah businessman who led the Federal Reserve from 1935 to 1950, commented that the major cause of the Great Depression was not reckless consumer spending but the vast accumulation of income in the hands of the wealthiest people in the nation, which siphoned purchasing power away from the rest: As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth—not of existing wealth, but of wealth as it is currently produced—to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulation. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in few and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped. ² As in the case of the lead-up to the Great Depression, by the end of the twentieth century, the middle class, having suffering from declining income for three decades and incurring excessive debt, was increasingly unable to purchase basic goods and services. Thus, while unemployment is currently (and appropriately) a major focus of attention, the origin of the problem lies with decades of inequitable sharing of the nation’s wealth and the loss of middle class purchasing power. Consumer spending is the main driving force of a healthy economy. In 2007, the median earned net wage for a US male was $45,000; when normalized to account for inflation, this wage is lower than what a comparable worker received thirty years earlier. ³ Additionally, the power of Big Money in Washington continues to promote low corporate and individual tax rates and loopholes, which have already contributed to a massive transfer of national wealth from the middle class to the highest income levels. Thus, poor and middle class Americans find themselves saddled with declining wages, benefits, and socio-economic opportunities. Clearly, the two periods, before the Great Depression and before the Great Recession, are both characterized by excessive income inequality and debilitating personal debt with minimal access of the middle class to additional credit. Also, in both eras, those possessing great wealth utilized

their resources (including access to credit) to speculate in high-risk stocks and real estate ventures, which evolved into investment bubbles that burst with substantial, widespread individual losses. In 1928, Goldman Sachs was one of many firms to profit by enticing unsuspecting investors with questionable financial products, which resulted in huge losses for investors and great suffering for the general population; this also occurred during the Great Recession. But unlike the period after World War II, businesses today continue to unabashedly follow the same selfserving practices. Also unlike the post-Great Depression period, when government responded aggressively to major financial fraud, economic deficiencies, and human suffering, Washington politicians today are unwilling to confront the business sector and well-funded special interest groups. Political and business leaders show an insidious lack of respect, compassion, and appreciation for the nation’s majority population, particularly toward the labor force. Today’s major corporations have a continuous source of cheaper labor overseas, which is a major game changer in the business sector, as compared to the post-Great Depression era. Consequently, continuing severe income inequality and the associated lack of jobs, cash, and credit have depressed consumer spending; there exists little justification for business to increase production of goods and services. Accordingly, the nation’s economic growth continues to be meager, while government and business avoid taking responsibility for the health of the economy and ignore the benefits of a mixed economy. Quite simply, business has found it more profitable to dismiss its basic bargain with the labor force; in the past, workers earned a just wage that enabled the masses to consume at a level sufficient to maximize the nation’s production capability. As a consequence, economic supply and demand remains unbalanced, as business, labor, and government appear incapable of cooperatively work toward a more stable and growing economy. Based upon the limitless money being poured into politics and having access to cheaper foreign labor sources and lucrative consumer markets, major corporations can function solo as global Supercitizens, while realizing greater profitability. Big Money has imposed its will on Congress and now also dominates American labor, which has become a secondary option. Middle Class Journey: Great Depression to Great Recession and Beyond

In the aftermath of the Great Depression, John Maynard Keynes identified two significant economic principles that were successfully pursued to reestablish a sound US economy. ⁴ First, by maximizing employment within a growing economy and creating an equitable distribution of national wealth, the total population will have access to the necessary resources to stimulate consumption and thereby create additional consumer demand, jobs, and business activity. Second, unemployment should be considered as a failure of a nation’s adequate demand for goods and services due to the loss of consumer purchasing power (i.e., adequate income). The history of capitalism reveals how difficult it is for a nation’s business, labor, and government leaders to (1) observe the ideals of a democracy, (2) create and maintain a dynamic equilibrium between business profitably supplying the marketplace and adequate consumer demand, (3) provide adequate and equitable income for the population, and (4) maintain economic and social stability within the social order. The principle of the virtuous circle of growth asserts that well-paid workers improve consumer demand and expand business activity, thereby creating jobs and creating a growing, stable socio-economic system. Government has an important role in achieving this delicate economic balance, which it totally failed during the pre-Great Depression and preGreat Recession eras. Importantly, in the last analysis, the success of a nation’s economic health is dependent on the political reality of the times, which is usually defined by the human struggle of ethics versus money and power, not necessarily on markets, economic theories, or political ideologies. In the absence of an equitable distribution of income and the ensuing depressed consumer demand, corporations have few incentives to invest in producing additional goods and services and thus accumulate cash reserves, which contribute little to growing and maintaining a healthy economy. Therefore, the experience of the Great Depression inspired the concept of the basic bargain, which is an understanding, from a national perspective, that employers should pay their employees a sufficient wage to ensure adequate consumption of the nation’s products and services, thereby maintaining a growing economy and a stable and satisfied workforce. Adherence to the bargain contributed greatly to the revitalization of the post-Great Depression economy and the three decades of prosperity that followed. During the thirty years from 1949 to 1979, all five quintiles of before-tax household incomes increased by about the same amount: 108 percent, or about 3 percent per year. ⁵ Income tax rates were significantly higher than in 2012, but the dynamics of the virtuous circle of growth produced historically high middle class income for all quintile segments, while nonfarm worker productivity doubled. Corporate leaders, in large measure, recognized that their long-term financial interests and those of the nation were best served by practicing stakeholder capitalism , that is, addressing the need for an equitable and productive balance of the rewards of economic prosperity among investors, customers, employees, and the public.

However, beginning in the late 1970s, the basic bargain was gradually eroded, as politics became increasingly influenced by business and its objectives for greater profits and less government regulation, which gradually diminished the political and economic influence of the middle class. For the period from 1979 to 2003, slower growth and greater income inequality prevailed as the income profile dramatically changed, and median family earnings increased by only 12.6 percent. The bottom 20 percent of earners gained only 3.5 percent, while the top quintile’s increase was 45.7 percent. During this period, there was an increase in women in the workforce; if that wave were excluded, the 12.6 increase for households at the bottom would have been even less, while the middle quintile would have been about constant. ⁶ During this period, tax rates for the wealthiest earners were significantly reduced under the presidencies of Reagan, Clinton, and George H. W. and George W. Bush. Consequently, these tax-rate changes and the significantly higher relative earnings of wealthier Americans from 1979 through 2000 combined to provide after-tax household income increases of 68 percent for the top quintile, compared to 9 percent for the lowest; the increase was 201 percent for the top 1 percent. ⁷ It is important to recognize that this significantly different profile for 1979-2000 compared to 1949-1979 was due primarily to tax policies, not free market economics; the result was a significant decline in middle class purchasing power. Moreover, from 1989 to 1999, the nation’s median household net worth remained constant while the total household net worth almost doubled. This remarkable statistic represents a major economic transition of the US economy from general prosperity to the final stages of the Great Recession. From 1983 through 1998, the lowest 40 percent of households experienced a 76.3 percent decline in household net worth, as the top 1 percent acquired a 42.2 percent increase in their asset ownership . ⁸ Prior to 1975, the middle class saved 9 percent of annual net income, which declined to 7 percent in the 1980s, 6 percent in 1994, and 2.6 percent in 2008. Debt significantly increased from 50 percent of annual net income, prior to 1980, to 100 percent in 2001, and to 138 percent in 2007. ⁹ Significant to comprehending the social impact of this data set is that, in 1966, 20 percent of mothers with young children worked outside the home; this figure increased to 60 percent by the late 1990s. ¹⁰ The long-term financial pressure on middle class families culminated in depleted family savings and consuming home equity assets; even though both spouses often worked, they also took on excessive credit card debt. With the Great Recession, the bursting of the real estate bubble, and mass home foreclosures, middle class families had few (if not nonexistent) sources of credit. The nation’s income gap since the early 1900s may be represented as a cyclic process. The extreme in income expansion and inequality of the Gilded Age in the 1920s was followed by a great reduction in that inequality from 1947 to the late 1970s. Beginning in the 1980s, there was a second income inequality expansion, which continues unabated at a record level. ¹¹

The nation now awaits the beginning of the next great compression, which will be necessary for a substantial economic recovery from the Great Recession and achieving greater social and economic stability. Some have attributed such cycles to normal fluctuations of the markets and periodic struggles to stimulate economic growth and stability. According to Kuznets curve of sequential economic stages, the middle class should ultimately receive an equitable share of national productivity, but only after investors have benefited from cheap rural labor that migrates to urban areas and lives a life of poverty, as in the Gilded Age. ¹¹ However, a broader interpretation of history reveals that the degree of national productivity that is shared among the people is more of a political phenomenon than an inevitable sequence of economic maturity. Rather independent of economic conditions, the gap in national income equality is primarily determined by the shifting balance of power between government and business and an associated shift in cultural values. Consider that from 1947 through 2008, America’s productivity expanded in a remarkably linear fashion, by a factor of four. Consider two segment of this economic success. First, until the early 1970s, the growth of average hourly compensation adjusted for inflation paralleled this rate of increasing productivity (i.e., all segments of the population benefited about equally). Second, from the mid-1970s on, the average hourly compensation figure remained essentially constant, thus remaining at less than a twofold increase for the total period from 1947 through 1947. ¹² Since productivity increased by a factor of four, who derived the additional benefits from the mid-1970s to 2008? The answer is, the same wealthiest Americans who also benefited from new post-1970s tax policies, which combined to compound the inequitably of shared income and provided them with enormous additional after-tax benefits. Clearly, in addition to stagnant wages of the labor force, the excessive post-1980s income inequality has been greatly affected by a conservative, pro-business, and pro-wealthy-class low tax rate policy, whereas a higher tax policy from the 1930s to 1950s served to decrease income inequality. The tax policies of the Roosevelt and Truman administrations were able to narrow the after-tax income gap created during the pre-Great Depression era, providing economic prosperity for all income quintiles from the late 1940s to the late 1970s. After this, the conservative Republicanism of the post-1980s reversed the cycle and created the current expansive income inequality, which has matched that of the Gilded Age. The two contrasting political philosophies, exemplified by the administrations of FDR and Reagan, produced two divergent outcomes: under FDR compression of income inequality resulted in greater prosperity for the middle class and robust economic growth, while under Reagan, the GOP began a multi-decade reversal of both. Paul Krugman casts the divergent outcomes in terms of “two great arcs in modern American history.” There have, then, been two great arcs in modern American history—an economic arc from high inequality to relative equality and back again, and a

political arc from extreme polarization to bipartisanship and back again. These two arcs move in parallel: The golden age of economic equality roughly corresponded to the golden age of political bipartisanship. ¹³ Thus, the 1980s represent the beginning of a major turning point in America, a significant socio-cultural transition, of trickle-up wealth accumulation rather than the promised trickle-down economic prosperity of the Reagan and Bush administrations. From 1973 to 2011, American productivity increased by 80 percent, while average wages increased by only 4 percent and hourly wages plus benefits by 10 percent. Meanwhile, just prior to the Great Recession in 2006, corporate profits accounted for the largest portion of national income since 1942, as the portion going to wages and salaries was at its lowest since 1929. In the aftermath of the Great Recession, corporate profits have returned to pre-Recession levels, while middle-class income remains stagnant. The prevailing corporate strategy has determined that greater short-term profits are possible by ignoring the lessons of the post-WWII era of prosperity and rejecting the principles of the virtuous circle of growth, stakeholder capitalism, the basic bargain, and the fundamental democratic principles of the common good and social justice. It is noteworthy that the tax increases in 1990 of presidents George H. W. Bush and in 1993 by Bill Clinton paralleled continuous economic growth from an average annual growth rate of less than 3 percent to almost 4.5 percent, which peaked during the first quarter of 1995 to the first quarter of 2000. President George H. W. Bush’s own party scorned his balanced approach of tax increases and budget reductions, and conservatives predicted economic disaster. However, the economy expanded at the fastest rate since the 1960s. In contrast, President George W. Bush’s 2001 and 2003 tax cuts paralleled an economic slowdown of the average annual growth rate from about 2.5 percent in 2003 to 0.6 percent in 2007, which led to the Great Recession. ¹⁴ Currently, conservatives have again been preaching tax rate reductions, particularly for the richest Americans, so as to supposedly grow the economy, which simply ignores history. Paul Krugman refers to the “notion that tax cuts for the wealthy pay for themselves… [as] a classic zombie idea in US political discourse… a proposition that has been thoroughly refuted by analysis and evidence, and should be dead—but won’t stay dead because it serves a political purpose and appeals to prejudices, or both.” Donald Marron, director of the Tax Policy Center and a former Bush administration official, notes that from 1940 to 1980, the top marginal tax rate was 70 percent or higher; at times of such high rates, reducing rates would theoretically have more of an economic impact. But at today’s 35 percent marginal rate, the impact of such reductions would be considerably less (if they had any appreciable effect at all). The nonpartisan Congressional Research Service noted that during the last sixty-five years, changes in the top tax rate “do not appear correlated with economic growth.” ¹⁴

Meanwhile, according to Forbes , in 1982, there were 13 billionaires (five from the same family), compared to 179 in 1996 and 374 in 2005. In 1980, CEOs of Fortune 200 companies had average compensation about 42 times that of average workers, but that ratio increased to over 500 by 2000. ¹⁵ Perhaps the most startling aspect of America’s post-1980s conservative political movement is the extent to which unholy corporate-political alliances have conspired to promote legislation that enables the financial and business sectors to create an unstable socio-economic environment, which makes a mockery of the principles of ethics and the public good. Creative public policy efforts to adequately and holistically address the consequences of excessive wealth inequality, corruption of the financial sector, the home mortgage crisis, extreme poverty, immigration reform, the failed public education system, and infrastructure decay are conspicuously and embarrassingly absent from the Washington agenda. These important issues have a devastating impact on the poor and middle class. Instead, the main focus of individual investors, politicians, businesspeople, and workers is the acquisition of additional income, whether for those workers who barely survive until next week’s anticipated paycheck or, at the other extreme, until bonus time on Wall Street. The (CBO) determined that from 1979 to 2006, households of the nation’s wealthiest 1 percent had an average increase in after-tax income of 256 percent, from about $337,100 to over $1.2 million, tripling the average income in just twenty-seven years. Data were adjusted for public and private benefits. ¹⁶ Roger L. Martin, dean of the Rotman School of Management at the University of Toronto, suggests that the modern economy now has a threeway struggle to share the nation’s created wealth, not just the dual players of labor and capital investors. ¹⁷ Historically, capital provided by investors and business owners represented “the means of production,” and workers turned “investment capital into profits,” with the former possessing “disproportionate power” and ultimately the upper hand. This traditional capital-versus-labor struggle has now incorporated an additional strong competitor, world-class talent, which has contributed to the earnings decline of the middle class and to the declining influence of organized labor. This exceedingly high priced and uniquely highly skilled talent is free to move globally to acquire select opportunities of choice, which includes top revenue generating entertainers, athletes, investment managers, corporate CEOs, and the best of the best from law, medicine, finance, and academics, who are able to demand lucrative contractual arrangements and often acquire percentages of the action. Dean Martin suggests that the 2012 National Football League (NFL) lockout of its unionized referees illustrates this modern struggle for revenues between capital and talent, which has accelerated within professional sports since 1975, when baseball players won free agency status. He underscores that in 1981, when President Reagan fired air traffic controllers, he replaced them with other “workers,” as opposed to “talent”; “it was a clear signal: labor had finally been forced to capitulate entirely.” The NFL “needs to

squelch all its generic labor because its highly expensive talent—the players —definitely can’t be replaced.” But the owners found out the hard way that the referees are also “talent,” not just “workers.” Accordingly, the nation’s income inequality may be defined as “the gap between the 99th percentile and the 50th percentile, and the gap between 1st percentile and the 50th percentile. America’s increase is primarily the former—hence the ‘99 percent’ movement. Talent is extracting more of the pie and getting richer.” ¹⁷ Decline of the Middle Class and Corporate Citizenship By the turn of the century, the tactics of America’s post-1980s conservative political movement had resulted in a highly polarized electorate and record levels of rancor, deviousness, and uncompromising arrogance within elected state and federal officeholders and by the general public. Political success became more keenly defined as winning elections at any cost, no matter what degree of unethical, nasty behavior was necessary; campaigns were run without integrity, and candidates often fabricated issues, depending on what was most damaging to the opposition. Major corporations and persons of great wealth unabashedly embraced the strategy of purchasing political influence in order to sway elections, legislation, and judicial appointments and to assume a role in the distribution of political messages via the public media. The potential achievement of self-serving financial, ideological, or social issue objectives has justified generous funding for lobbying activities, think tanks, political action groups, media outlets, and candidates. Meanwhile, the political influence and power of the middle class, including organized labor, veterans’ organizations, fraternal groups, and other special interest groups, historically related to middle class America, have been substantially diminished. In the past, organized labor has played a strong role as a counterbalancing force to corporations seeking to maximize profits, CEO compensation, and political influence. The current corporate philosophy, reflective of the times, differs considerably from that of Henry Ford, who in 1914 paid his autoworkers $5 an hour. This rate was admittedly overly generous, he said, and intended to enable employees to buy his cars. The Wall Street Journal labeled what turned out to be a smart capitalist strategy, yielding great profits and content workers, as “an economic crime,” while others referred to Ford as a madman or a socialist. Actually, Ford was practicing the virtuous circle of growth; that is, well-paid workers stimulate the nation’s consumer demand for cars, expand the car business, and create more jobs for the auto industry. ¹⁸ However, over the last few decades, modern corporate-political alliances have been enormously successful at the state and federal levels in reducing the influence of organized labor, dampening labor rates and benefits, and inflicting severe, long-term economic wounds on the economy. The recessionary economy and associated high US unemployment level is due to many factors, including rapidly advancing technology and economic globalization. Correspondingly, corporations face the formidable challenge of an increasingly ill-prepared US workforce that is unable to meet the demands of an increasingly advanced workplace; the twenty-first century’s

highly technical economy requires an intricate knowledge base and related skills. In particular, robotics and computer-managed manufacturing are playing an increasingly major role in small and large-scale businesses. America’s middle class employment has been and will continue to be affected, not only by such escalating technological requirements, but also by more aggressive corporate strategies that increasing rely on global marketing, production, and consumption. Unfortunately for future US middle class employment prospects and the nation’s middle class economy, these new-age corporate strategies will increasingly rely on the resources of foreign countries and their favorable tax laws, which will negatively affect American job creation and US tax revenues. Inherently, globalization will continue to provide major US corporations with advantages of low cost labor, inexpensive production sites, and abundant profits. In Who Stole the American Dream? Hedrick Smith begins the chapter entitled “Hollowing Out High-End Jobs” with a quote from Ralph Gomory, a former IBM vice president: “In this new era of globalization, the interests of companies and countries have diverged. In contrast with the past, what is good for America’s global corporations is no longer necessarily good for the American people.” In addition, Smith quotes an 1814 letter from Thomas Jefferson: “Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gain.” ¹⁹ Increasingly, the foreign workforce has acquired the necessary education and key skills, which, combined with a passion for success and strong dedication to a highly disciplined work ethic, provides a highly desirable commodity for business. Thus, over recent decades, American multinational corporations have acquired access to low cost-for-performance advantages relative to American labor. This represents a shifting production priority to Eastern Europe, Asia, and South America. For decades, American high schools and colleges have produced, by international standards, a declining level of achievement in the academic pursuits of math, science, technology, and engineering. In contrast to the United States, other nations such as China and India have dramatically raised their academic standards, improved student performance, and increased quantitative and qualitative international rankings. Meanwhile, American manufacturing has adopted a more sophisticated integration of labor, information technology, robotics, and engineering technology, which has contributed to the nation’s increasing productivity and profitability, but which will continue to inherently decrease the labor force. Employee benefits and training costs, particularly retirement and health benefits, will continue to serve as a substantial motivator for corporate innovation to improve productivity utilizing technological advancements in lieu of labor and to increasingly rely on lower-cost foreign workers and favorable international tax environments. Significant to the issue of corporate decision-making in utilizing US versus foreign-based production options is the de-emphasis of America’s corporate sense of citizenship and social responsibility. Taking a serious role in

contributing to the nation’s common good in lieu of increasing corporate profits has become outmoded. Accordingly, the appeal for American corporations to pursue the fruits of economic globalization has increasingly reduced its US employment levels, tax payments, investments in research and development, and social responsibility. From 2000 through 2010, American corporations increased foreign employment by 2.4 million workers, at the same time reducing US employment by 2.9 million. In 2009 and 2011, the thirty-five largest US companies increased American employment by 113,000 jobs and by 333,000 in foreign nations. In 2011, Apple had 43,000 workers in the United States while employing 700,000 abroad. More American companies are investing in foreign countries to perform their research and development activities, with such investments increasing from 9 percent in 1989 to over 15 percent in 2009. ²⁰ The decline of corporate social responsibility in favor of maximizing profitability is reflected by an Apple executive quoted by the New York Times : “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” In 2000, General Electric had a majority of both its employees and revenues based in America, but by 2011, neither was true; 53 percent of the $150 billion in revenues, up from 35 percent a decade earlier, came from abroad. GE is beginning a $500 million expansion of its research and development facilities in China, and in addition, an initial $2 billion investment is being made in Shanghai. ²¹ Consistent with this view of corporate citizenship, Milton Friedman, former chairman of the Federal Reserve, once referred to the idea of corporations having “social responsibilities” as being “subversive”: “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.” ²² That such a revered economist, who has occupied such an important government position, should discount corporate responsibility for the nation’s common good illustrates the general absence of morality from economic theory and how the nation arrived at it current state of cultural dysfunction and degradation. Beginning as early as the late 1970s, the political influence of labor has appreciably declined, and labor laws have become increasingly less supportive of unions. Business has been able to inject a more aggressive attitude into federal and state legislation in matters of union organization and activity, wages, benefits, and most proposals favoring workers. A major victory for business occurred in the spring of 1978, when the Senate failed to pass legislation that would have increased penalties on businesses that took aggressive action against union activities. Business spent three times that of the unions to lobby for the legislation, gaining support among small business owners and bringing out historic quantities of mail to Congress for an unexpected, impressive victory, supported by both parties. The unions were losing political support in Washington even while Democrats controlled both houses of Congress and the White House.

Thus, not only has middle class employment suffered from the impact of economic globalization and technological advancements, but labor also continues to lose political influence. Business has gradually acquired great leverage over organized labor and has extracted many concessions that have improved profitability while reducing middle class employment, wages, and benefits. Additionally, Reagan’s Economic Recovery and Tax Act of 1981 provided further tax cuts for businesses and the wealthiest Americans, including tax loopholes, reduction of income and capital gains tax rates, and a change to the estate tax rate, which was cut from 70 percent to 50 percent. This legislation was responsible for increasing income—and wealthbased gaps between the middle class and the wealthy class that already existed by adding a tax rate-based gap. Thus, for over three decades, America’s middle class has suffered from increasingly stagnant to declining social and economic conditions, as globalization, technological advances, and the power of money in politics reduce opportunity and the chance for upward mobility. And once more, America’s pathway to another major economic recession and financial crisis was launched, arriving at the beginning of the twenty-first century. Degradation of the US Wage, Salary, and Benefit Structure Organized labor, once a strong, effective political advocate for a broad array of middle class interests, has lost its dynamic punch from decades ago, when it not only championed worker’s direct employment interests, but also public education, the well-being of the elderly, health care, and civil rights. Examples include legislative battles to pass Social Security, Medicare, and the Civil Rights and Voter’s Rights acts. However, the massive political impact of the business sector’s political associations has overwhelmed those who have attempted to preserve organized labor’s vital role and the influence of the middle class. The corporate sector’s past support of the mixed economy as a sound philosophy and profitable business practice, wherein business profits and worker safety and compensation interests were fairly and justly balanced and monitored via government’s responsibility to protect the public’s interest, has become a relic of the past. This trend continues into the twenty-first century, as conservatives attack social and employment legislation, which contributed to the broad-based socioeconomic prosperity following World War II through the 1970s. The anti-labor movement of pitting capital versus labor included a nationwide effort by the Republican party in 2011 and 2012 to expand rightto-work state legislation. The GOP played upon the public’s fear that being a right-to-work state could help an already troubled economy and that organized labor deprived workers of their individual rights. The number of right-to-work states reached twenty-four in 2012, as Indiana and Michigan, traditional manufacturing states, were added to the list. In Michigan, business leaders offered the argument that workers should not be forced to join a union against their will, but in fact, Michigan workers already had the right to opt out of union membership. More to the true objective of right-to-work legislation, a University of Notre Dame study in 2012 found that the average wage, including benefits, for

nonfarm workers in right-to-work states, was $57,732, while in states without such legislation, the figure was $65,567. Additionally, right-to-work states have higher rates of poverty and lower rates of health coverage. Clearly, such laws are designed to support more wage and benefit concessions for workers so as to enhance business profits. ²³ Unionism reached its peak in the mid-1950s, when about 40 percent of American workers, both union and nonunion members, were covered by union contracts. The president of the US Chamber of Commerce believed that “collective bargaining is a part of the democratic process.” ²⁴ In January 2013, the Bureau of Labor Statistics reported union membership had declined by 400,000 to 14.3 million, while general employment increased by 2.4 million. As a result, the nation’s union membership is at its lowest level since 1916. There were new state laws suppressing union activities in Wisconsin, Indiana, and other states, and the increase in right to work states is cited as a major factor. Union membership dropped last year by 13 percent in Wisconsin and 18 percent in Indiana. ²⁵ Timothy Noah in The Great Divergence cites JP Morgan economists who identified a major portion of corporate profits between 2000 and 2007 as being derived from “reductions in wages and benefits.” Harvard economist Richard Freeman found that approximately 20 percent of America’s current, historic income inequality gap is the result of the decline in unionism. Noah writes, “Say what you want about the abuses that labor committed. They were adversarial. They weren’t concerned enough about the general prosperity. Some of them were mobbed up. But they were necessary institutions.” ²⁴ While the wealthiest segment of the American population has received an increasingly larger share of the nation’s economic productivity since the 1970s, organized labor has lost membership, and its contracts with management have yielded significant temporary and permanent concessions. In recent times, unions agreed to establish what was intended to be a short-term, second-tier compensation system for new workers in struggling businesses. This concept was used to reduce labor costs, with the understanding that wages would eventually return to previous rates. However, permanent two-tiered union agreements have become the new norm, notable examples being General Motors, Chrysler, and Caterpillar, but which now appear to be a more general regional strategy for profitable companies that are not experiencing financial difficulties but wish to expand business. Three profitable manufacturing companies in southeastern Wisconsin— Harley-Davidson, Mercury Marine, and Kohler—have embraced two-tier wage and benefit contracts. Harley-Davidson’s union workers accepted a new contract that freezes wages for current workers for up to seven years, reduces benefits, provides new employees with lower wages, and permits hiring temporary workers at an even lower wage and without benefits. Additionally, current employees who are temporarily laid off could return to work as second tier employees. Harley-Davidson’s president stated, “What we are doing is not mean-spirited, we have to retool if we want to survive. We should have started doing this, in small steps, twenty years ago.” ²⁶

Mercury Marine employees have accepted a similar contract, while Kohler employees appear to be following suit. In all three situations, the threat by management to move its manufacturing elsewhere heightened an existing atmosphere of fear, emanating from unemployment and the recession. In 2012, General Motors announced production of the new Chevrolet Sonic, with a base price of about $14,000, which will represent a new addition to the lowest tier of the car market. Many of the workers will earn $14 an hour, as compared to the full UAW entry wage of $28. So that the Sonic could be built in the United States rather than in a foreign country, the union agreed that 40 percent of the plant’s union workers would be “entry-level wage” employees, so as to reduce GM’s production cost and enable the low-cost product to be profitable. In the United States, GM pays wages and benefits of $30 an hour for an entry-level employee and $60 an hour for a full-wage union member. Ford rejected the UAW’s similar efforts for production of its Fiesta subcompact and elected to manufacture it in Mexico, paying wages and benefits of $10 an hour. ²⁷ Lance Morrow, addressing the proliferation of temporary workers, comments: America has entered the age of the contingent or temporary worker, of the consultant and subcontractor, of the just-in-time workforce—fluid, flexible, disposable. This is the future. Its message is this: You are on your own   .   .   .   . This is the new metaphysics of work. Companies are portable, workers are throwaway. ²⁸ The model of creating a separate class of lower compensated employees has migrated beyond the blue-collar manufacturing industry to the professions, more specifically to the legal profession. Large law firms have created positions, referred to as “career associates,” who earn less than half the salary and work fewer hours than a lawyer on the “partner track” (i.e., “permanent associates”). This model is a dramatic change for the legal profession, which has followed the partner model for over fifty years and is driven by the reduction in attractive partner track positions. Law firms have referred to this shift as the profession’s “version of outsourcing. Except, we’re staying within the United States.” However, it also appears to be a strategy within a struggling economy intended to maintain the escalating partner salaries. It is noted that for decades, hourly rates have significantly increased for routine work by junior associates, whose beginning salaries have been about $160,000 a year plus bonus. The new model permits the firms to have the same work done by qualified lawyers at more than half the cost. ²⁹ Thus, the distribution of national income continues to be shifted toward the wealthiest citizens at the expensive of a large majority of increasingly poorer Americans. While the nation’s profitability has steadily increased since World War II, wages and salaries now constitute the lowest share of the nation’s gross domestic product since such data was first recorded in 1947. However, by 2006, corporate profits reached their highest share since the 1960s. One investment bank, UBS, describes the current times as “the

golden era of profitability.” Goldman Sachs economists noted, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of the national income.” ³⁰ From 1980 to 2004, the top 20 percent of American earners increased real income by 59 percent. German society offers an interesting contrast to America’s national budgetary priorities, political objectives, and economic strategies. During the 2000s, Germany had large export surpluses, as the United States endured multitrillion-dollar trade deficits. During the last twenty years, the Germany economy has outpaced America’s, and their hourly wage has increased by 30 percent since 1985, while the US increase has been only 6 percent. Germany lost a smaller share of manufacturing to foreign nations, and currently 21 percent of Germany’s work is in production, compared to 9 percent of US workers. Moreover, Germany’s 1 percent highest earners account for 11 percent of all income, equal to that of 1970, while the current US figure is 23 percent. ³¹ The success of Germany’s post-Great Recession recovery may be attributed to, first, its long tradition of investing in a highly educated workforce that matches worker education and skills with the country’s employment needs. Second, the cooperative spirit between labor unions and employers and the effective working relationship between business and government are great strengths that serve the nation well. ³² For example, during recent recessionary times, a program was created to avoid laying off workers by utilizing government reserves created during more prosperous times to compensate workers whose hours were to be reduced or eliminated. ³³ Germany’s government, labor unions, and businesses realized that in the long term, it was better for all parties to have more people working, even just part time, a rational strategy with the potential to quickly respond to opportunities to revive the economy. Thus, the German view of the government’s role during an economic downturn was to facilitate and fund programs to maximize the number of people working, keep industry productive, maintain strong labor unions, and stimulate middle class spending and consumption. For most Americans, this impressive post-1980s German scenario of corporate, government, investor, and working class cooperation, compromise, and success is beyond their wildest dreams. The former head of the major electrical corporation Siemens Klaus Kleinfeld attributes German success to its “social contract: the willingness of business, labor, and political leaders to put aside some of their differences and make agreements in the national interests.” ³⁴ Clearly, people are Germany’s first priority, and they realize this is key to achieving long-term prosperity. While Germany has maintained a culture of political compromise and wise economic priorities during this period, major US business leaders, with the assistance of complicit politicians, have financially and politically disenfranchised the middle class, fought against government regulation, neutralized the influence of organized labor, and cancelled the social contract.

Belligerent warfare within and between the two US political parties, greedy corporations seeking short-term profits, and lobbyists investing in selfserving outcomes have worsened America’s accelerating social and economic degradation. Conversely, Germany’s more altruistic and constructive approach to economic crisis reflects the nation’s greater appreciation of how the fundamental principles of democracy are applied to benefit the whole society. Hedrick Smith comments on contrasting American and German government policy: The difference is not in technology but in our government policies and our corporate strategies. Germany has maintained strong trade unions and a strong social contract between business and labor, even reducing unemployment during the Great Recession, while America’s jobless rate shot up. ³⁵ Poverty in America “There is hay in the barn but we’re not feeding the horses.” At the lower ends of the nation’s wealth accumulation and income distribution curves, approximately forty-four million, or more than 14 percent, Americans were living in poverty in 2011, which is an increase of four million from the previous year. This includes fifteen million, or one in five children. In 2011, over 25 percent of Hispanics and blacks were designated as poor. ³⁶ During the last forty years, there has been a dramatic shift toward lowerwage jobs. Consequently, according to the Census Bureau, 104 million people, or a third of the population, have annual incomes of less than $38,000, which is twice the established poverty level for a family of three. According to the Economic Policy Institute, half of the nation’s jobs pay less than $34,000 a year, a quarter of which are below the poverty line for a family of four, paying less than $23,000 annually. Many poor families have both parents working and often more than one job, but since this is not a viable option for single mothers with young children, such households have a poverty rate exceeding 40 percent. Given that wages for jobs at the bottom half of the wage scale have risen by only 7 percent since the early 1970s, those living in a prolonged period of poverty have reason to doubt that new economic opportunities are about to arrive. Twenty million people, an increase of eight million since 2000, suffer from extreme poverty, earning less than about $9,500, or half the poverty level for a family of three. In the mid-1990s, more than two-thirds of children in poor families received welfare, but during the past decade and a half, due to the reduction of welfare expenditures, this figure has declined to 27 percent. Additionally, six million people have no income other than food stamps, which is equivalent to 30 percent of the poverty line, or $6,300 for a family of three. Due to the recessionary economy, 46 million receive food stamps, compared to 26.3 million in 2007. While the number of people receiving cash assistance has increased from 3.9 million to 4.5 million since 2007, many states have reduced the number of people who qualify and have lowered benefits. ³⁷

Contrary to popular opinion, the American unemployment program is “one of the least generous in the advanced industrial world,” ³⁸ with only 38 percent of the unemployed receiving benefits in 2011; 44 percent had never received any benefits, and more than half of the unemployed had no health insurance. With this as the national context, consider the following average household after-tax income data, which include public and private benefits. For the twenty-seven-year period from 1979 to 2006, the poorest one-fifth of Americans had their net average household income increase from $14,900 to $16,500, while the middle fifth income average increased from $42,900 to $52,100, and the top 1 percent increased from $337,100 to $1.2 million. It should be noted that the middle class household data are significantly influenced by the increasing number of women entering the workforce and by individuals finding it necessary to take a second or third job in order to increase household earnings. ³⁹ In the 1960s, 12 percent of married women with children less than six years of age were employed out of the home; this figure increased to 55 percent by the late 1990s. ⁴⁰ The United States’ persistent crisis of excessive poverty may be directly correlated with over three decades of inadequate investment in educational opportunity from infancy through college, which is a major contributor to the nation’s current social and political instability and to the nation’s cultural degradation. In particular, children from the lower one-third of the socio-economic structure are denied adequate educational opportunities necessary to be successful in the short—as well as the long-term, relative to children of affluent families, seriously impeding potential high achievers from being competitive in high school and college. James Heckman, a Nobel Laureate in economics, reports ⁴¹ that children whose mothers were college graduates had significantly higher cognitive test scores at ages three, eight, and eighteen than children of mothers who had dropped out of high school. “The gap is there before kids walk into kindergarten. School neither increases nor reduces it.” The US gap of 110 points on reading tests between students from prosperous backgrounds and disadvantaged students, according to the International Student Achievement program conducted by the OECD, is one of the widest among the sixty-five nations participating in the study. Heckman and others point out that a child’s cognitive abilities correlate with behavioral traits such as sociability, motivation, and self-esteem as well as with adult earning potential. Further, he notes that America’s effort to recover from its sharply declining international ranking for college completion by investing more money in government Pell grants will be of little assistance for most disadvantaged five-year-olds once they reach college age, it “does not go far in compensating for low levels of previous investment.” Thus, studies show that the quality of a pre-school educational experience is critical to acquiring fundamental cognitive capabilities and desirable lifelong social, financial, and intellectual outcomes, for which playing catch-up in the teens and adult years is unlikely. Importantly, the OEDC assigns the

United States an international ranking of thirtieth in its share of government spending on “the very young.” In 2008, the US federal and state governments spent more than $10,000 per person in kindergarten through twelfth grade, $5,000 per person for three-to five-year-olds, and $300 for those under three. While the current emphasis on greater investments in financial aid to enable all students to complete a college education is a noble goal, the lack of investment in adequately preparing the very young to acquire the broad range of capabilities necessary to successfully navigate the challenges of high school and college is a crippling shortcoming. This educational deficiency contributes significantly to the nation’s labor shortages in the sciences, engineering, and technologies and to its excessive and expending income equality, which has produced a deteriorating middle class economy. Helping those who can succeed and contribute greatly to the nation’s social and economic well-being is a wise long-term investment for both the private and public sector, reflecting a compassionate and wise population. However, the current Washington political strategy and mentality toward reducing the public debt and federal budget deficits promises little success in providing wise long-term investments in the general well-being of average Americans. The primary focus on reductions of Social Security and Medicare benefits as well as on programs that feed infants and children and assist the unemployed, disabled, disadvantaged, and chronically ill, while ignoring the nation’s long neglected investments in education, health, and infrastructure, will only accelerate the nation’s decades of cultural degradation. “The war on entitlements” continues to fuel a spiraling economic depression for the poor and middle class at the expense of historic corporate earnings for the wealthiest few percent of Americans. Also, future retirement benefits appear to be as bleak as the current economic conditions, not just for the poorest segment of the population but also for a large majority. Thomas B. Edsall notes ⁴² that two-thirds of Americans now reaching age sixty-five rely on an average yearly Social Security benefit of $15,168 for minimally half of their income. Also, 72 percent of those now reaching age sixty-five do not receive guaranteed pension benefits and, as will be discussed, the failure of the misrepresented 401(k) retirement programs will only add to the financial insecurity of future senior citizens, “this monster is out of control.”

Edsall, among others, argues that the perceived long-term financial Social Security and Medicare issues have rational solutions but are not in the best interests of wealthy Americans and thus are being ignored by members of Congress, as threatening to the financial interests of donors, as well as their own. First, the (CBO) agrees that the financial crisis facing the Social Security system would be resolved if all wage earners paid the 6.2 percent payroll tax that funds Social Security Benefits. Currently, earnings above $113,700 are exempt from this payroll tax, which impacts only 5.2 percent of all working Americans. Second, the Medicare program relies on a 1.45 percent tax for the first $200,000 of earnings for a single person and for the first $250,000 for married couples, which is reduced to 0.9 percent for all additional income. The combination of Medicare and Social Security taxes, known as FICA and associated with the Federal Insurance Contributions Act or payroll taxes, are highly regressive taxes and inconsistent with the nation’s usual progressive tax policies. The non-partisan Tax Policy Center reports the lowest income quintile paying a 7.3 percent FICA on earnings compared to 6.8 percent for the top quintile, 2 percent for the top 1 percent, and 0.9 percent for the 0.1 percent. ⁴² As discussed more fully elsewhere, the nation financial solvency and its funding for social programs and public works suffer from historic declines and fifty years lows in the percent of GDP devoted to federal tax revenues. During 2009, 2010, and 2011 these percentages were 15.1 percent, 15.1 percent, and 15.4 percent, the lowest since 1950. Furthermore, the CBO estimate of new revenue necessary to maintain Social Security solvency for the next seventy-five years is 0.6 percent of GDP, which is equivalent to their estimate of federal tax revenue to be gained from eliminating the current $113,700 income cap on Social Security payroll tax. When asked why Congress doesn’t address the regressive nature of social welfare taxes by such approaches and solve the problem, Theda Skocpol, Harvard professor and recognized authority on the history of the American welfare state, commented, “at one level, it’s very, very privileged people wanting to make sure they cut spending on everyone else” while “holding down their own taxes.” ⁴² The erosion of income and benefits, accumulated wealth, and socioeconomic opportunity has severely and disproportionately affected the nation’s poor and middle class segments of the population. A sustained period of high unemployment and inadequate income is directly associated with increasing rates of poverty, personal debt, home foreclosures, crime, and imprisonment. The disappearance of opportunity to achieve the American dream is also illustrated by the racial diversity of income and wealth in recent years: ⁴³ • From 2005 to 2009, the median wealth of Hispanic households fell by 66 percent, whites declined by 16 percent, African Americans by 53 percent, and Asians by 54 percent. Household wealth or net wealth is defined as assets such as a house, a car, savings, and stocks, less liabilities such as mortgages, car loans, and credit card debt.

• In 2005, approximately two-thirds of Hispanic net worth was in the form of home equity, which, by 2009, declined by 51 percent due to the collapse of the home market. • From 2005 to 2009, the proportion of all Americans with no net wealth sharply increased. Specific shifts include Hispanics from 23 percent to 33 percent, blacks from 29 percent to 35 percent, and whites from 11 percent to 15 percent. In 2009, about one-quarter of blacks and Hispanic households owned nothing but a car, compared to 6 percent for whites and 8 percent of Asians. • In 2005, a third of whites owned stocks and mutual funds, compared to 8 percent of Hispanics and 9 percent of blacks. However, by 2009, the median value for these assets dropped by 9 percent for whites and 71 percent for blacks, with the latter decline most likely due to the need to sell assets at the lower prices of this period. • The median wealth of Hispanic and black households is at the lowest value since such data have been collected, beginning in 1984. Discretionary services represents a category of consumer spending that is particularly useful during recessions to determine where people are reducing their spending. The Federal Reserve defines “discretionary services” to include restaurant meals, entertainment, education, and insurance but excludes housing, food, and health care. Prior to the Great Recession, such spending had never declined in one year by more than 3 percent per capita, but in 2012, it declined by almost 7 percent. Importantly, this record recessionary decline in discretionary services spending by the lower and middle classes, the lack of jobs, the collapse of the mortgage market, and record personal debt simply reflects exhausted financial resources and maximized debt. Unlike previous minor recessionary periods, there was no easy access to new sources of family cash, as was previously available from two spouses working, credit cards, and home equity loans. During the last three decades, US personal spending increases outpaced incomes, as increasing family debt supported financial needs, if only in the short term. The record US credit card, mortgage, and student loan debt levels, while in many cases due to poor financial judgment, were also the consequence of over three decades of historic wealth inequality. Reinhart and Rogoff, after studying eight centuries of global financial crises, conclude that accumulated debt is the primary cause of recessions, and aftermaths are deep and prolonged with a persistent decline in output and employment. On average, recessions last about four years, with unemployment typically reaching 7 percent. ⁴⁴

Given this profile of basic human need, consider a 2012 House of Representatives proposal that called for large reductions in food assistance programs. Specifically, the food stamp program of $133.5 billion is listed for a 7 percent reduction over the next ten years. Additionally, the Center for American Progress report, The Race That Really Matters , notes that more than a quarter of US children have one or more chronic health condition such as obesity or asthma that threaten their capacity to learn, half of US children get no early childhood education, and more than half of US postsecondary students drop out without receiving a degree. ⁴⁵ Clearly, the persistent inequitable maldistribution of wealth and the resultant hollowing out of the middle-class economy has dramatically failed the test of a capitalist democracy meeting its societal responsibilities. Not only has the opportunity for upper mobility declined for most Americans, the ability of the less fortunate to survive and of established middle class families to maintain their life style has been compromised. 401(k) Retirement Plans: “This Monster Is Out of Control” Three decades ago, defined pension benefits of guaranteed yearly payments were provided to about 80 percent of large and medium-sized companies; by 2011, this had declined to about 10 percent, which will undoubtedly have major negative consequences for future generations of retirees and for the national economy. ⁴⁶ Businesses have realized significant financial savings by transferring employees from corporate-funded pension programs, representing enormous future financial liabilities, to individual private pension programs controlled by the employee. Data from the Employee Benefits Research Institute (EBRI) show that only 22 percent of workers fifty-five or older have more than $250,000 set aside for retirement, and 60 percent have less than $100,000, with $100,000 being the average. Teresa Ghilarducci, a behavioral economist at the New School who studies retirement and investor behavior, commented, “The 401(k) is a failed experiment. It is time to rethink it.” ⁴⁶ Given the current investment data profile for American workers, future retirees, on the average, are facing significantly less real annual income than current retirees, who benefit from more generous public and private pension plans. This is another illustration of the excessive transfer of national wealth during the last three decades, as wealth has been taken from an overwhelming majority of Americans to enrich the nation’s wealthiest citizens. In 1978, a congressional tax bill contained an innocuous provision, subparagraph 401(k), intended as a deferred compensation tax break for corporate executives; it was not designed as a middle class pension fund but was intended to defer taxes on bonuses and profit sharing earnings of highly paid executives. However, the concept was quickly discovered as a profitable corporate strategy to off-load an enormous financial liability by transferring future investment risks, management costs, and annual financial obligations for employee pension plans to the worker. The traditional, secure benefit of a company-guaranteed income for life gradually disappeared from the American scene. ⁴⁷

Of major importance, in the 1980s, the mutual fund industry saw an opportunity for a very lucrative new line of products by utilizing the 401(k) tax law. Brooks Hamilton, a veteran pension consultant, identifies the marketing strategy: “Be your own money manager… . It had a lot of sex appeal. And it was power to the people.” The 401(k) concept, as serviced by the marketplace, grew from seven million clients in 1984 with $92 billion in assets to twenty-five million clients with $675 billion in 1994 and to fortyfour million clients with $2.2 trillion in 2004. By this date, “it had become one of the two principal pillars of American retirement, along with Social Security.” Hamilton notes, “In the old system, employers put up most of the money—89 percent. The employees contributed 11 percent… . Today [2012], employees are paying more than half—51 percent—and the companies 49 percent.” ⁴⁸ Thus, another tool was added to the corporate toolbox to shift greater profits to the investor class and executive compensation rather than to worker wages. It is estimated that about half of all American workers do not benefit from an employer-based retirement plan, and only about 40 percent are enrolled in a 401(k) plan. About sixty-five million Americans are heavily dependent on the 401(k) program, so how well is it doing? Hamilton’s evaluation is that the best-educated, best-paid employees and executives were getting investment returns that were six or seven times greater than the returns for average workers. That gap has been compounded year after year: “We have a yield disparity that is a financial cancer in this, in our great beautiful 401(k) movement… . It would destroy the opportunity for ordinary workers to retire in dignity… . They can’t get there from here.” ⁴⁹ The best-kept secret of the mutual fund based 401(k) retirement programs is the effect of earnings distribution on the retiree’s final portfolio value due to the mathematics of “compounding cost,” or as John Bogle, the founder of the Vanguard Group refers to it, the “tyranny of compounding cost.” His illustration, offered in an April 2013 PBS Frontline investigative report entitled “The Retirement Gamble,” was for a one-time $1,000 mutual fund investment at age twenty, which assumed an 8 percent annual growth rate until age eighty-five and a 2.5 percent annual management fee. Over the sixty-five years, these annual fees would consume 79 percent of what the investor would have earned with no management costs. Yearly data confirming Bogle’s illustrated have been provided by benefits expert Brooks Hamilton. ⁵⁰ Aptly, some investors, who comprehend the math, plan their retirement strategy around simple, low costs, and lower turnover index funds, which are tethered to a specific financial market. According to the Employee Benefits Research Institute, as of January 2011, the typical 401(k) account balance was $17,686; for those in their sixties with at least twenty years of contributions, it was $84,469. According to EBRI, 45 percent of the next generation of retirees will be seriously at risk of not meeting their basic financial needs, which is not a comfortable retirement. When retirement medical costs are factored in, this percentage rises to 65 percent. ⁴⁹

The following summarizes the impact of the thirty-year-old 401(k) legislation, as utilized to rid the business sector of pension fund responsibilities: ⁵¹ • Half of US workers do not receive retirement plans from their employers. • Among eligible employees, 23 percent made no contributions in 2010, and only 10 percent typically contribute the maximum amount allowed. • Half of the millions who change jobs fully cash out of their program, which is not rolled over to another plan. • Many people withdraw money from the plan for cars, homes, and furniture. Ted Benna, an architect of the 401(k) plan, comments, “I would blow up the system and restart with something totally different… . Now, this monster is out of control.” ⁵² Failed Public Education Arguably, the most egregious hypocrisy of American politics during the last half century has been the shameless disregard for the collapse of the nation’s system of public education, including the demise of a once highly regarded profession: teaching. As with health care, the government’s responsibility to provide the public with quality education has been deemed impossible; those in control claim that funding education is unaffordable due to the continuing lack of state and local resources. Inevitably, prior to election time, parents and politicians recognize their respective roles to go through the ritual of strongly emphasizing the importance of education to the nation’s future. Those running for office passionately acknowledge the wisdom and need for effective educational experiences for young people while pointing out the reality of scarce resources for many pressing needs, particularly for military expenditures, and of the problem of existing budget deficits. Parents are expected to exude equal passion for the principles of all children being prepared to pursue the American dream and become all they are capable of becoming. However, the day after the election, voters and politicians join in solidarity that the top agenda items are pragmatic: take-home pay, business and individual tax reductions, job creation, and economic growth. This may be translated into budgets that reflect minimum damage to the voter’s pocketbook and will not reflect badly on the party’s chances in the next election. Meanwhile, parents with modest to high incomes seek the best for their children, rather than the best for all of the nation’s children, and increasingly rely on private schools and home schooling to provide their children with an adequate education. Parents at the higher end of the income scale have done the educational cost-benefit analyses and concluded that it is cheaper in the long run to pay out of pocket for a private K-12 education and utilize public higher education for their children, than to pay higher local property and state income taxes for a lifetime. Thus, wealthier voters and politicians, with a wink and a nod, have established an

understanding and the acceptance of their mutual sense of political economics: politically correct rhetoric before the election and pragmatic political avoidance afterward. Essentially, Americans have formally assigned a higher priority to minimizing tax revenues and maximize income than providing adequate public funding for education and for social and public services. Consequently, the severe deterioration of America’s public K-12 system, which began in the 1970s, may be attributed to the public’s unwillingness to provide adequate tax support sufficient to establish a world-class public education system, capable of benefiting all children. As a result, inadequate facilities, equipment, teacher compensation, and staffing have systematically destroyed America’s once highly valued public school teaching profession. It should not be unexpected that a nation, undergoing a half century of selfimposed deterioration of its public elementary and secondary schools, would be equally unsuccessful in achieving impressive high school graduation rates and producing well-prepared, more successful college graduates, relative to international standards. Equally predictable, and a major problem for the business sector, is the failure of public education to provide high school graduates not going to college with a sufficiently high standard of basic education, academic self-discipline, and career counseling in specialized technological and service sectors. Furthermore, two-year colleges have excessively promoted and catered to the preparation of traditional four-year college students with questionable success, rather than training for midlevel technical careers. The failure of the American public K-12 educational system is often attributed to insufficient, excessive, or faulty testing procedures, curriculum issues, teacher retention and tenure policies, and the length of the school day. However, the origin of unacceptably low academic achievement and graduation rates is first and foremost the public’s unwillingness over many decades to treat teachers like other American professionals; teaching professionals should be prepared and compensated comparable to other industries. This includes more intense academic preparation in the subjects to be taught at the high school level and the insistence that public school standards and funding be consistent with that of highly ranked nations. Each generation of politicians creates a new educational program or evaluation fad, which supposedly represents major education reform but which avoids the basic problem of the lack of a world-class teaching profession, supported by an equal standard of resources. A March 2011 report by the McGraw-Hill Research Foundation and the OECD cites major disparities between American school systems and those of countries achieving more superior student outcomes. In general, the report said, “the teaching profession in the United States does not have the same high status as it once did, nor does it compare with the status teachers enjoy in the world’s best-performing economies.” ⁵³ Specifically, about 50 percent of new teachers leave the profession within five years due to low salaries and a discouraging work environment. When compared to OECD nations, American high school teachers work longer hours, and the proportion of school budgets devoted to their salaries is substantially lower.

Consistent with this low national priority for public education, in the aftermath of the Great Recession, teaching positions, benefits, and pension funds were among the first wave of expenditure reductions, further crippling the country’s floundering system of public education. The Center on Education Policy reports that 70 percent of school districts nationwide endured budget cuts during the 2010-2011 school year. It is estimated that by 2015, two million additional children will be enrolled in public schools. However, in 2012, twenty-three states reduced K-12 budgets. Politicians and the general public attacked the teachers’ union activities, work ethic, time commitment, and performance, justifying the funding reductions in terms of accountability and excessive costs. Meanwhile, politicians call for corporate and individual tax reductions. It is noteworthy that prior to World War I, Great Britain had 1 percent of its youth graduating from high school, while America graduated 9 percent. By 1950, America had exceeded 50 percent, and Britain had reached only 10 percent. However, since the 1970s, a number of countries have surpassed the United States in high school graduation and college attendance rates. ⁵⁴ In 2011, the US National Academies ranked America eleventh among industrialized nations in the fraction of twenty-five—to thirty-four-year-olds who have graduated from high school and sixteenth in the college completion rate. Urban school systems, e.g., New York City public high schools, have suffered the worst systemic degradation and have become so ineffectual as to be a national embarrassment. Fifty years ago, the secondary public schools of New York State were recognized as a national standard of excellence. Recent assessments by the New York State Education Department have documented the degree to which the state’s high schools have becoming ineffectual in preparing students for college and future employment. Statewide, 72 percent of students entering high school in 2006 became graduates in 2010, but only 37 percent were deemed adequately prepared for college. The New York City cohort had 61 percent graduating, but based on math and English test scores, only 21 percent were deemed prepared for college or well-paying employment. The percentages of students in Rochester and Yonkers with passing test scores were 6 percent and 14.5 percent, respectively. The racial profile statewide for college-readiness of these 2010 graduates was 56 percent Asian-Americans, 51 percent white, 15 percent Hispanic, and 13 percent black. ⁵⁵ In light of the State Education Department findings, it is instructive to review the assessments of city graduates by the City University of New York (CUNY). ⁵⁶ Of the city high schools rated as the highest by both the State Education Department and the city’s most recent progress report (which had at least one-third of its graduates attending a college of CUNY), forty-six schools out of the seventy had remediation rates above 50 percent. The CUNY remediation rate, based on an entrance exam, was 49 percent in 2010. The fifty highest performing high schools had an average mediation rate of 21 percent, compared to 77 percent for the lowest.

Perhaps the most embarrassing outcome was a preparatory school with a graduation rate of 88 percent, which was consistently rated “A” on city progress reports during the last three years. Of the thirty-eight students, or 39 percent of its graduates, entering CUNY last year, 75 percent did not pass the entrance reading, math, or writing exams. New York City and New York State illustrate the half-century-long selfdestruction of a once highly rated public school system and teaching profession. Meanwhile, politicians provide the population with misplaced rhetoric exhorting “national exceptionalism” while failing to mention decades of low and declining international ranking for public education student graduation rates and competencies and for teacher preparation. Federal Taxes Too High? But, Relative to What? The nation’s current political environment continues to condone inadequate investment in education, health care, infrastructure, basic research, and social welfare, based on an assumed unaffordability. At a same time, the country experiences record corporate profits and accumulated wealth for its richest citizens, while living the myth since the Reagan administration that low individual and corporate tax rates stimulate economic growth and best serve the nation. But the social and economic plight of the middle class as depicted in this chapter does not coincide with the hypothetical outcomes of Reaganomics. Incredibly, the Republican 2012 election agenda focused on maintaining low individual and corporate tax rates, reducing budget deficits via social programs, and creating jobs while ignoring income inequality, which played a major role in creating the recessionary economy in the first place. Disparate, partisan economic concepts in the form of talking points were recited while avoiding any realistic attempt to resolve the nation’s economic woes, most especially the state of middle class Americans. Perhaps of greatest significance, Americans have been unaware for decades (or remain in denial) that declining and inadequate federal tax revenues, measured relative to the nation’s percentage of GDP, have contributed to a precipitous decline in economic, social, and educational international rankings, unsustainable public debt, and a stagnant middle-class economy. It should not be surprising that both political parties avoid, like the plague, any mention of the inadequacy of current tax rates to reduce the national deficit and kick-start the economy; such a message would be the kiss of death for anyone’s political career. It is understood that election season after election season, voters look for the candidate who will put the most money in their pocket, provide more benefits without raising their taxes, and address their particular hot button social issue (i.e., promising to reduce someone else’s rights or to protect their own rights).

Conspicuously absent are civil and constructive discussions about taxes and expenditures; there are no dialogues involving a spirit of compromise at a high standard of ethics and civility. American politicians ignore the internationally accepted benchmark for evaluating a nation’s level of tax revenues, public debt, and social and public expenditures, capable of providing a growing, stable economy that benefits all citizens. The degree to which the “no tax increase” ideology has dominated the Republican party may be measured by the fact that October 1990 was the last time that any congressional Republican voted for higher income taxes until January 2013. ⁵⁷ This philosophical approach may make for pragmatic election-day politics, but it is not smart economics. In 1993, not one Republican voted for Clinton’s deficit reduction package, which produced the first balanced budget since the late 1960s. It is noteworthy that during Clinton’s eight years in office, the nation’s ratio of debt to GDP declined dramatically from 49 to 33 percent; this ratio is a more appropriate parameter for evaluating a sustainable budget strategy than just a dollar value. Since World War II and prior to Barack Obama, seven of the last 10 presidents left office with a ratio lower than when they arrived in office. The exceptions were Reagan and father and son Bush. ⁵⁸ James Leach, Iowa representative from 1977 to 2007, said, “When I entered politics the frame of reference was a balanced budget as the principle conservative precept. Today it’s the level of taxes.” ⁵⁷ Here is the height of Republican hypocrisy: the party’s position for almost a quarter of a century has been to reduce expenditures on vital social and public services while not supporting tax increases; GOP members were, however, willing to vote for additional spending, deficit-producing tax reductions, and two off-budget wars. One would think that before elected office-holders could rationally refer to taxes as being too high, especially prior to drastically cutting spending on public education, infrastructure maintenance, and the social safety net, they would have some benchmark in mind (other than saying what makes people happy). This is particularly revealing, since such an accepted international standard has existed for decades. The international community has long relied upon a nation’s GDP, which adequately represents the market value of goods and services produced as the way to evaluate its level of tax revenue collected and expended. In 2000, an OECD study found that among the twenty richest nations, America had the highest budget deficit, lowest tax revenues, and lowest public spending on health and social problems relative to the percentage of its GDP. The United States also had the lowest increase in tax-to-GDP ratio for the period from 1965 to 2009. Based on international rankings, nineteen nations were better providers of food, shelter, education, and health care for their total populations than the United States, which collected the lowest percentage of its annually created national wealth in taxes. ⁵⁹ It is noteworthy that capitalist Japan and socialist Sweden , despite embracing very dissimilar political philosophies and economic methodologies, achieved the highest rankings for the degree of income

equality, for public sector social expenditures, and for fewer health and social problems. ⁶⁰ How is it that Japan, a major capitalist economy, and Sweden, a more socialist nation, can both thrive economically while maintaining the highest international rankings for better educational outcomes, better health care for all of their citizens, and fewer social problems than the United States? The answer is that, while embracing entirely different political and economic philosophies, the two nations have the will and compassion to assign the common good of all members of society and the achievement of social justice as their highest national priorities. They achieve their objectives by balancing government revenues and expenditures via entirely different political and economic philosophies, based on a unified cultural priority, whereby government, business, and labor place the long-term well-being of the people first. So much for America’s currently uncompromising, polarizing, paralyzing political party ideologies and economic philosophies. Based on international rankings, nations with a greater degree of income equality consistently have higher rankings of well-being across their total populations and for a variety of problems. Additionally, the other nineteen nations provide universal health care. ⁶¹ Since 1965, based on the outcome of improving the living standards of average people, nineteen nations have made larger and wiser investments in their people and their future socio-economic prosperity than the United States. It is vitally important to recognize that the issue of excessive income inequality is based on the lack of fairness to those who have participated in creating national wealth; no one is saying that all should receive the same amount of income. But just what is this degree of “inequality” or “inequity” of the American public’s earnings? For many, it smacks of the dreaded socialism! First, a certain degree of income inequality is essential in order to create a prosperous democratic capitalist system. But second, if income inequality becomes excessive and thus inequitable, a middle class economy will collapse from a loss of consumer purchasing power. The US economy began this disastrous journey in the 1980s, culminating in the nation’s record income and wealth disparity and the worst recessionary economy since the 1920s. Perhaps of greatest human significance, the other members of the world’s twenty richest nations provide universal health care, while our country’s politicians tell us the United States, the world’s most prosperous nation, can’t afford such an objective, even though we have the lowest life expectancy ranking among those twenty nations. ⁵⁹ Given America’s inferior international ranking, it is worth noting that the nation’s budget deficits of the twenty-first century have been, to a great extent, the result of steadily increasing federal spending, as corporate tax revenues (as a percentage of profits) have steadily declined. At the same time, after-tax incomes of the wealthiest Americans have dramatically increased due to a combination of significant increase in gross income and tax rate reductions and loopholes.

According to the Congressional Budget Office, corporate taxes as a percentage of profits from US activity declined from an average 25.6 percent during the period from 1987 to 2008 to an average of 12.1 percent in 2011. ⁶² This statistic demonstrates that trickle-down economics during the Reagan and two Bush administrations has not been successful, other than to make the rich richer and the poor and middle class poorer. Trickledown economics has proven to be no more than a political ploy, a myth to inspire visions of riches for all, but which has enriched only the wealthiest Americans. However, the myth appeals to all income groups at election time, as a potential source of additional income is a more probable payoff than playing the lottery, but the outcome has been stagnant middle class wages. Clearly, reputable, quantitative international data and benchmarks provide a basis for comprehending America’s last three decades of gradual economic degradation to its current historic extremes of income and wealth inequity and of inadequate federal tax revenues and social and public program expenditures. But sadly, no politician aspiring to run for public office could pick up this banner; they would not survive a party’s selection committee for choosing potential candidates, must less win an election. And most Americans, if they have been paying attention, know why. Rothkopf reports that a review of many international studies of the quality of life shows that nations designated as “top performers were heavily concentrated in Northern Europe, Australia and Canada with strong showings in East Asia countries from Japan to Singapore. It is no accident there is a heavy overlap between the top performing countries and those that also out perform the United States in educational performance… spend more on infrastructure… are more environmentally conscious and offer more comprehensive social safety nets and national health care to their citizens. That virtually all of the top performers place a much greater emphasis on government’s role in ensuring social well-being is also undeniable… . For example, many of the countries that top the quality-of-life lists like Sweden, Luxembourg, Denmark, the Netherlands, and Norway all rank high in lists of fiscally responsible nations—well ahead of the United States, which ranks 28 th on the Sovereign Fiscal Responsibility Index.” ⁶³ The Pathway to Self-Destruction In recent decades, America’s nasty political conflicts have ignored the need to find creative, constructive approaches to providing for the well-being of all citizens, choosing instead to expound on uncompromising and vague ideological positions. As an illustration, after seven presidents, representing both parties, failed to provide universal health care, Obamacare has finally become law, but the minority party continues to block its implementation. A higher priority has been assigned to political extremism and party domination, rather than compromise, as GOP leadership caters to the financial interests of the major hospital groups, insurance and pharmaceutical corporations, lawyers, auditors, and medical practitioners. The power and influence of Big Money and the corporate-political alliance has subdued the political voice and economic prerogatives of a large majority of Americans.

In the twenty-first century, a radical individualism took hold of a significant portion of Americans that treats taxation as an undemocratic hijacking of a person’s (or a business’s) hard-earned income. Further, it erroneously represents providing support for less fortunate people as a socialist redistribution of income; this attitude holds that people should take care of themselves, regardless of circumstances. In truth, this self-serving argument is a convenient, pertinacious rationale for what is personal greed in a land of potential opportunity for all. It demonstrates a lack of compassion and shows an unwillingness to provide assistance and help others succeed, as the success of others is seen as threatening their financial gains and social status. The consequences are apply summarized by Joseph Stiglitz: Over the past quarter century macroeconomics and monetary policies and institutions have failed to produce stability; they failed to produce sustainable growth; and, most importantly, they failed to produce growth that benefited most citizens in our society   .   .   .   . We cannot have a monetary system that is run by people whose thinking is captured by the bankers and that is effectively run for the benefit of those at the top. ⁶⁴ Chapter V Equitably Sharing Productivity within a Capitalist Democracy: Fundamental to Common Cause, Social Justice, and Economi c Growth In terms of the distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a century   .   .   .   . Those same decades were also the high point of social connectedness and civic engagement. Record highs in equality and social capital coincided   .   .   .   . Conversely, the last third of the twentieth century was a time of growing inequality and eroding social capital   .   .   .   . The timing of the two trends is striking: Sometime around 1963-70 America reversed course and started becoming both less just economically and less well connected socially and politically. ¹ Robert D. Putnam Historically, primitive societies typically exhibit stronger altruistic attitudes, societal-oriented priorities, and a communal goal of sharing assets and responsibilities than have highly successful, mature civilizations. During a social order’s genesis and early stages, individualism, expressed as a primary supporting dedication to the common good, is, out of a desire to survive, more likely to focus on group objectives, creativity, and discipline and strong social cohesion. Such cultural characteristics are consistent with a strong willingness of individuals to freely participate in the production and equitable sharing of resources among those contributing to the social order’s advancement, thereby enhancing the culture’s probability of evolving into a fully mature socio-economic system.

Such individual characteristics place great value and respect on a sense of community and the associated responsibilities and benefits that are shared when all members actively participate in the social order. However, the gradual transition of a society from its genesis and early growth stages to full maturity, exemplified by America’s last half century, is characterized by Robert Putnam as evolving from a high degree of “social connectedness and civic engagement” to “a time of growing inequality and eroding social capital… becoming both less just economically and less well connected socially and politically.” ¹ Accordingly, in recent decades, America has failed to live up to its former high standard of human values and the fundamental principles of democracy. The nation has reached a point in time when flawed cultural values, a lack of integrity, and dearth of ethical principles have rendered obsolete the democratic ideals of common cause and social justice. As a consequence, a cultural mentality of self-serving individualism and greedy materialism is the order of the day; it has created excessive wealth inequality, declining middle class wages, a stagnant socio-economic system, a decaying infrastructure, and a reduction of public and social services in an era of increasingly severe poverty and mounting illiteracy. The consequences of ignoring the principles of common cause and social justice, most evident from the nation’s Great Depression and the Great Recession experiences, should be ample evidence that long-term economic growth and stability depend on adherence to democratic ideals. Fluctuations of Cultural Values and Income Inequality America’s 2007-2008 financial and economic crises and the continuing nasty political atmosphere and governance gridlock are the consequence of many decades of anti-altruism, extreme materialism, widespread unethical and undisciplined behavior, and disrespect for the rights, freedoms, and beliefs of others. The high degree to which such attitudinal and behavioral deficiencies prevail, not only within business and politics but also among the general population, represents a destructive change in our national temperament, as was most evident during the 2012 election campaign. Campaign oratory was conspicuously devoid of sentiment or constructive efforts to improve decades of national degradation, as poverty, inadequate health care, inferior education, and fewer opportunities increasingly impact the poor and middle class and diminish their upward mobility. Those who have ascended to America’s pinnacle of wealth and power are not motivated to address what the international community has come to recognize as the gradual degradation of American society, as they simply ignore the extremes of wealth inequality and the inferior social conditions of a majority of the US population. This attitude represents a deepening negative cultural mentality that has increasingly prevailed since the 1980s, as the major political issues have become reducing deficit spending, minimizing (if not eliminating) social programs, and lowering taxes for business and the wealthiest Americans. A review of the nature and extent of income inequality expansion and contraction since before the Great Depression provides insights into cultural

values, human behavior, economic theories, political ideologies, and human consequences. First, for the period just prior to and just after the Great Depression (from the mid-1920s to 1940), the wealthiest 10 percent of Americans acquired 45 percent of the nation’s income, corresponding to a maximum in income inequality and human suffering . Second, for the period from 1941 to the late 1970s, the top 10 percent’s acquisition declined to 33 percent, representing a minimum of inequality and reduced human suffering , an unparalleled period of shared prosperity. Third, from the 1980s to 2006, income inequality dramatically increased to a maximum, with a record 50 percent of the nation’s income being captured by the top 10 percent. More amazingly, the wealthiest 1 percent received 75 percent of all income gains from 2002 to 2006, and 93 percent from 2009 to 2010. ² From this income inequality expansion-contraction cycle, it would appear that as wealth inequality has become excessive, economic activity has sharply declined, and the suffering of the poor and middle class has become significantly greater. Clearly, trickle-down economics has not produce prosperity for the general population, only for the wealthiest members of society. As a side comment, the thought of a major corporation allocating 50 percent of its annual compensation to just 10 percent of its employees is ludicrous. No CEO or board of directors would ever consider such an imbalance, based on fairness, employee morale, and the need to create economic incentives and rewards as a sound retention policy; most of all, such inequality would threaten the corporation’s long-term viability. Thus, whether a company employing a few thousand employees or a nation of hundreds of millions, the dynamics of a successful long-term organization requires some degree of economic equity and fairness for all members. Recall that this is consistent with documented outcomes of other leading nations during the last three decades, as was discussed in chapter IV. These include the following: • International data and benchmarks demonstrate that nations with greater income equality have consistently experienced higher measures of human well-being, as measured by the degree of health and social problems across total populations and for a variety of problems. • The International Monetary Fund documents that excessive income inequality is a deterrent to a nation’s economic expansion. • Despite representing divergent economic and political ideologies, the capitalist democracy of Japan and the economically and the philosophically dissimilar social democracies of the Scandinavian countries are leading nations of the world in providing for the highest level of well-being for their general populations while having a low degree of income inequality. As previously noted, four of the Scandinavian nations—Norway, Switzerland, Denmark, and Sweden—had higher GDP per capita outcomes in 2010 than the United States.

Interestingly, some of this nation’s states have equally impressive performances. In 2010, the states of New Hampshire and Vermont utilized different approaches to achieve the first and third best performances, respectively, in the index of national health and social problems. Vermont has the highest tax burden of any state, while New Hampshire has the second lowest, but they ranked sixth and fourth, respectively, for income equality. Note: income here denotes net income adjusted for private and public benefits received. As with the comparison of Japan and Sweden, significant differences exist between the two states in their reliance on private benefits provided by employers and those provided through public benefits. Thus, other nations as well as American states are able to achieve high levels of income equality while employing vastly different philosophical and economic models, which combine variables of strict free market economics, equitable incomes, fair taxes, and benefits so as to minimize health and social problems and maximize the well-being of their people. ³ However, perhaps the most definitive evidence that America’s excessive income equality is responsible for the nation’s inadequate social safety net and social service programs is the impressive collection of international data maintained since the mid-1980s. As previously discussed, the United States has earned the worst composite OCED rankings among the world’s richest twenty nations for providing for the well-being of its total population. One could conclude that cultural values that reflect altruism, seeking the common good, providing social justice, and achieving an equitable sharing of created wealth will best achieve high levels of social and economic stability and general well-being. This cultural mentality provides the foundation for fostering more civil, compassionate, and compromising politics, which promotes more effective and efficient governance and empowers economic growth. The lesson to be learned is that more than one narrowly conceived political philosophy or economic model is capable of providing solutions to complex social, economic, and political issues. This prescription is consistent with the human history of economic “pulses” and “lulls,” which coincide with eras of shifting cultural values and altruism to ruthless behavior, which can be found in the literature of civilization studies. Pitirim Sorokin has pointed out that since the time of ancient Greece, early stages of cultural development have been dominated by an altruistic “Ideational” mentality, characterized by the prevailing philosophical currents of thought being logical and having meaningful associations with the truth of faith, the ethics of principle, and the discipline of theology. Thus, an Ideational mentality (or the nature of one’s attitudes toward individualism, moral values, and character that are learned from culture) is expected to have the highest respect and priority for allegiance to the social order, as opposed to self-interest. Religion and culture become the primary sources for defining, nurturing, and monitoring an individual’s sense of character, discipline, responsibility, and values; it is not based on how one intuitively via the senses responds to a given issue or a competitive opportunity. Conversely, a more self-oriented individualism, characteristic of the later cultural growth phase (and appropriate to twenty-first-century America), has

historically conveyed a highly self-centered mentality and an addiction to self-gratification and materialist outcomes. Motivation is based on the ethic of seeking individual rewards and happiness rather than accruing benefits to the whole of society. Sorokin defines this “Sensate” mentality as being primarily based on the human senses and the ethic of seeking individual happiness; thus, the senses of the mind predominantly become the judge of truth, as well as falsehoods. This environment encourages individuals to base their morals, character, values, and general behavior on the attitude of “how it feels” and “what’s in it for me” rather than on the impact on others within society. Clearly, America of the twenty-first century is dominated by this Sensate mentality. During America’s genesis stage, the experiences of the Founding Fathers in their homelands instilled in them a great sensitivity to protect the new nation against the abuses of the aristocracy, which unfortunately became infectious in the eras of the robber barons and the nation’s two Gilded Ages. The clear lesson derived from American history since 1900 is that the equitable sharing of a nation’s productivity, based on a democratic capitalist system, requires the visible and effective hand of government to insure that the responsibilities, contributions, and rewards of investors, producers, consumers, and labor are balanced so as to be in the best interests of all stakeholders and the nation. This government responsibility includes monitoring, regulating, and evaluating the performance of all parties involved, as well as the effectiveness of economic, political, and social systems in meeting constructive, long-term objectives. During the last three decades, the American governance system has failed miserably in both effort and effectiveness in meeting its responsibilities to the people, and as a consequence, the nation has suffered irreparable social and economic damage. America’s Two Gilded Ages and The Global Economy The Industrial Revolution universally fostered a more aggressive business culture, as the potential to accumulate enormous wealth became obvious to many creative, capable, and knowledgeable people. Those pursuing such opportunities proceeded to develop and sharpen the necessary economic, social, and political skills for executing successful economic strategies. Those possessing great wealth and being well positioned within the financial and industrial sectors accumulated abundant personal wealth, while an underclass paid the price for such economic success and descended into various degrees of misery and poverty. This era also marked the beginning of a continuum of competitive conflicts within and among Western nations in creating social and economic winners and losers; these periods of fluctuating wealth inequality, social stability, and personal well-being were seen all over the world.

The degree to which the Industrial Revolution provided human stimulation to seek great wealth and contribute to global economic growth may be appreciated from the work of Angus Maddison. From AD 1 to 1000, the annually compounded economic growth rate of Western nations decreased by 0.01 percent; it increased between 1000 and 1820 by 0.34 percent; and it increased from 1820 to 1998 by about 3.0 percent. ⁴ Accordingly, the Industrial Revolution period brought enormous wealth to America, which was accompanied by significant undesirable outcomes. These included the infamous robber barons and the values of the first “Gilded Age” (1860s to late 1890s), which produced decades of expanding wealth inequality and its crop of superrich 1-percenters. One of the most successful tycoons of the period, Andrew Carnegie, captured the prevailing mentality of the era toward the inevitability of creating winners and losers, deemed “essential to the future progress of the race.” It is here; we cannot evade it; no substitutes for it have been found; and while the law may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department. We accept and welcome, therefore, as conditions to which we must accommodate ourselves, great inequality of environment; the concentration of business, industrial and commercial, in the hands of a few; and the law of competition between these, as being not only beneficial, but essential to the future progress of the race. ⁵ Carnegie viewed the industrial sector as composed of “thousands of operatives in the factory… . Rigid castes are formed, and [as] usual, mutual ignorance breeds mutual distrust. Each caste is without sympathy [for] the other, and ready to credit anything disparaging in regard to it.” Various authors have contrasted this Gilded Age mentality of accepting social and economic inequality with that of greater equality during America’s revolutionary era. Specifically, the writings of Thomas Jefferson are cited and reflect “the country as it was during the American Revolution—one of the most egalitarian societies on the planet.” ⁶ As a response to the excesses of the first Gilded Age, the Progressive Era (1870 to 1930) attempted social and political reforms, particularly to reduce corruption, but the expansion of wealth inequality continued until the financial crash of the Great Depression. Following World War II, from 1947 to 1975, broadly shared economic gains of earners compressed the record pre-Great Depression income inequality due, in large part, to government meeting its responsibility to the general population for the adherence to the principles of the basic bargain and the common good. The shared prosperity of the 1970s paralleled a second major transformation of the American economy, which was based on significant achievements in a broad range of technologies, accompanied by major advancements in basic and applied sciences and in engineering. Consequently, the late 1970s initiated an expansion of income inequality, which continues in the postGreat Recession years. Chrystia Freeland, in Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else , addresses the impact of a rapidly evolving technology-based global economy

The rate of technological change is faster than it has ever been and it is moving from sector to sector. It is likely that it will keep on expanding at an exponential rate. As individuals, we aren’t getting smarter, but society as a whole is accumulating more and more knowledge. Our access to information and technological assistance in going through the mountains of chaff to get to the wheat—no society has ever had that. This is huge. ⁷ During the last three decades, this second major economic transformation of the American economy, a second Gilded Age, has rapidly brought a flood of new goods and services to the marketplace, which relies on better-trained workers, more advanced transportation and communication systems, and more creative financial and marketing strategies. Importantly, this era has been greatly influenced by wealthy individuals and major corporations, which successfully influence and dominate political parties and state and federal legislative, judicial, and executive branches of government. Consequently, Big Money has increasingly been able to successfully manipulate the nation’s adoption of regulatory, taxation, and social policies. The new group of twentieth-century robber barons, now feeding on steroids, has the benefit of a global playground; they easily pick off huge monetary benefits from worldwide labor forces and production sites, inexpensive investment capital, and advantageous tax laws. These global bargaining advantages for corporations and investment groups inherently place all American workers, particularly lower and middle class labor, at a great economic disadvantage. Importantly, the twenty-first-century global economy is an integration of a second Gilded Age for well-established Western nations and a first Gilded Age for the emerging markets of Latin America, Asia, and Africa, which have aggressively and successfully entered the global marketplace. The merging of mature and recently developed national economies on the world stage has created enormous opportunities for America’s major corporations and wealthiest citizens, as they can invest in specific global markets depending on opportunities for the greatest profitability. Also, they have the huge advantage of possessing (or having access to) enormous amounts of investment capital. Unfortunately, but in the true spirit of Andrew Carnegie’s view of free market competition, the consequences for the American worker has been a degradation of the pre-1980s relative middle class standard of living, specifically reductions of employment levels, career mobility, wages, and company-funded pensions. The financial success of Apple’s iPod exemplifies the best of American creative corporate financial modeling; Apple has maximized access to the world’s human, physical, financial, and legal resources, contributing to the company’s profitability. Apple also generated a positive human outcome by increasing the planet’s economic growth, more specifically, contributing to the elevation of foreign economies and supporting foreign workers. However, the combination of foreign and US financial outcomes represents a net erosion of American workers’ well-being and the nation’s economic growth rate (but it represents an appreciable benefit to America’s megarich).

In 2006, Apple’s iPod project employed 27,250 people abroad, earning a total of about $320 million, and 13,920 people in the United States, earning a total of about $750 million. The average annual wage for foreign workers was $11,740. Its American workers may be subdivided into 7,789 working in nonprofessional office and retail staff, earning a total of $220 million, or an average annual wage of $28,200. The remaining 6,101 engineers and other professional workers earned over $525 million, for an average annual wage of $86,100. ⁸ Apple executive and stockholder earnings plus these wages provide an illustration of the typical effect of foreign outsourcing in contributing to the nation’s income inequality. The iPod project was an example of a highly successful globalized business model; it should provide Americans with food for thought, as the nation attempts to rebound from a recessionary economy and addresses the collapse of its middle class economy. Consider the relative financial gains of Apple’s strategy of segmenting its workforce, thereby creating a highly profitable international endeavor. The creativity and genius of Apple’s highest level professionals and Apple investors were richly rewarded, made possible by the combination of many very-low-wage foreign production workers, a few low-wage unskilled American workers, and few high-wage professional American workers. Additionally, as previously noted, Apple skillfully used international and US tax policies to minimize federal and state taxes. In 2011, as one of the nation’s wealthiest and most profitable companies, Apple paid only a 9.8 percent tax rate on profits of $34 billion. In a micro-sense, one could conclude from a global business perspective that Apple successfully maximized the company’s profits and contributed to economic gains of foreign countries and their labor forces. However, there would appear to be little, if any, elevation in net socio-economic benefits for the world’s workforce; at best, it was a global “zero-sum” game. Additionally, the model contributes to the expansion of US wealth inequality. Another viewpoint, based on an individual’s sense of self-worth, well-being, and long-term goals, considers whether Apple’s Chinese workers, who migrate in large numbers from rural areas to massive urban live-in production centers, are better off. These workers appear to endure sweatshop conditions, but they have viable employment; their greatgrandchildren may benefit from China’s impressive economic growth. Whereas US lower and middle class workers face a bleak economic future from this corporate model; it is very difficult for them to see a positive impact for their great-grandchildren. Further, America’s increasingly anti-altruistic cultural attitude, and its political preference to reduce government support for public education and for public and social services for those in need, does not bode well for the future prospects of the majority of American workers and the middle class economy. There is a new normal for the US economy: the ruthless wealthy elites and political leaders are focused on reaping their individual rewards rather than creating a sound economic model within a stable political framework that returns the American cultural values to become more representative of Sorokin’s Ideational mentality.

The Fallacy of Self-Correcting Free Markets Robert Frank tells us that “‘having more income’ and ‘being better off’ do not have exactly the same meaning… . Spending patterns prompted by recent changes in the distributions of income and wealth have imposed not only important psychological costs on middle-income families but also a variety of more tangible economic costs.” ⁹ America’s post-1980s cultural drift toward ultra-conservatism, anti-altruism, and confrontational politics has delivered multiple traumas to the lower and middle class segments of the population. This large majority of Americans has endured losses (or meager increases) in real income since the late 1970s, declining employer benefits and government public services, and a reduction in their standard of living, marginal status, and self-respect relative to the wealth accumulation of the nation’s richest citizens. The nation’s historic political polarization gap is matched by its wealth gap. Flawed cultural values and misguided human behavior often override sound economic concepts that inherently appeal to reason and conform to democratic ideals, thereby contaminating and disrupting the dynamics among investors, the business sector, workers, consumers, and government. America’s post-1980s era constitutes such a flawed environment. The fallacy of incorruptible self-organizing and self-correcting markets was one painful lesson learned from the Great Recession, as belatedly and embarrassingly acknowledged by former Fed Chairman Alan Greenspan (as discussed in chapter IX). Who better to reinforce, via his painful experiences and misjudgments, the need for enhanced government regulation of the financial industry as being essential to insuring that a free market economy satisfactorily meets its responsibilities to all the country’s stakeholders? Joseph Stiglitz describes the inherent fallacy of the marketplace: A regulatory agency is captured by those that it is supposed to regulate when the policies it pursues and regulations that it adopts reflect more the interests and perspectives of those that it is supposed to regulate rather than the public interest. Capture occurs partially as a result of revolving doors, where the regulators come from the regulated sector and, after their brief stint in government, return to it. “Capture” is partly what is called cognitive capture—in which the regulator comes to adopt the mind-set of the regulated. ¹⁰ The successful implementation of a free market economy , also referred to as simply a market economy , requires sound investment, production, and distribution decisions that reflect a balance of production supply and consumer demand, with prices of goods and services determined by a free market system. There are many possible variations of a free market economy. Historically, the US version has been a mixed economy, whereby there are market regulations and subsidies, and where the government funds research and provides public assistance for the elderly and those in need. There are various opinions regarding the role of government in insuring the integrity, efficiency, effectiveness, and equality of a free market economy. Here, “equality” may be interpreted as the opportunity to freely participate in and fairly benefit from economic outcomes. It is most evident in this second decade of the twenty-first century that Congress, as

recognized by a 9 percent approval from the public, has failed miserably in its responsibility to insure that the nation is well served by an efficient and effective free market economy. Today’s system is neither free nor just. Instead, the financial entities supposedly to be regulated are essentially able to write the regulatory legislation that will serve them best as a result of the industry’s intimate, insidious relationship with politicians. Dwayne Andreas, chairman of Archer Daniels Midland (ADM), has remarked, “There isn’t one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians.” ¹¹ ADM profits appear to greatly benefit from government subsidies. In 2009, ADM’s revenues exceeded $69 billion, and about 43 percent of profits were derived from products subsidized or protected by the US government. For every $1 of ADM profits from production of ethanol, taxpayers spent $30, while consumers spent $10. More generally, during the 1980s, trade restrictions cost consumers $6.8 billion a year, and government subsidies to business were $30 billion. Benefits went overwhelmingly to the “richest and most powerful corporate farmers.” In the period of 2003 through 2005, 10 percent of farm recipients accounted for 73 percent of subsidies, or $91,000 per farm, whereas the bottom 80 percent of farms averaged $3,000. ¹² Of forty sugar companies, eight produce 75 percent of the total sugar on 0.5 percent of farms in America, with 6,200 workers. The sugar tariff provides manufacturers about $1 billion in profits a year, while higher prices cost the economy about $3 billion. ¹³ From 1995 to 2009, corn producers received $73.8 billion in government subsidies to produce more corn than the free market could sell at an acceptable price. The corn industry’s lobbying and campaign spending increased from about $8 million in 1992 to about $19 million in 2010, while the sugar industry’s campaign spending increased from about $1.6 million in 1990 to about $4.7 million in 2010. ¹⁴ Accordingly, given the investment of abundant resources and effort over the last three decades, major corporations have gradually achieved a controlling position to manipulate state and federal governance and attain remarkably friendly legislation, which has significantly enhanced corporate profitability and the compensation levels for the nation’s wealthiest individuals. In the process, a mockery has been made of the free market concept. Meanwhile, the corporate-political alliance orchestrates legislative modifications of major financial industry regulations, previously enacted to avoid a repeat of the financial sector’s collapse during the Great Depression. In large measure, Big Money has been successful in enacting friendly legislation to reduce the government’s ability to monitor, investigate, and prosecute fraud in the financial industry and other businesses. The continuing abundance of unprecedented amounts of money flowing into politics, not only to influence key national and state elections but also to confuse and mislead the American population regarding social and economic policies and consequences, has severely destabilized the democratic

foundation of the country. This represents only one aspect of the continuing degradation of the American culture, propagated by corporate and political strategies that center on wealth, power, and influence. First, the allocation of corporate resources is designed to maximize shareholder profit and executive compensation while minimizing average worker wages and benefits, with little concern for the effect on the nation’s average standard of living or the success of the middle class economy. Second, the democratic principles of social justice and the common good have been relegated to the status of obscure business priorities, more appropriately addressed through minimal tax-deductible donations. Third, the importance of an equitable distribution of income to fuel the middle class economy and contribute to a growing economy has been systematically displaced by wealth inequity of historic proportions. Workers have lost the leverage to bargain for increases in wages and benefits, and middle class wages have stagnated. Fourth, the fanatical political emphasis on low tax rates and loopholes for corporations and the wealthy has resulted in decreasing tax revenues as a percentage of GDP and a destructive lack of investment in education, public services, science, infrastructure, and research and development. As a result, America has become increasingly less competitive internationally. Fifth, government has failed badly in its responsibility to regulate the nation’s financial and environmental affairs, as profit has become the dominant motivator. In the twenty-first century, the theoretically complementary responsibilities of business and government to provide for the public good within a growing economy and a stable social order has become a sham. According to economist Joseph Stiglitz, Nobel Prize winner and former chairman of the Council of Economic Advisers: People around the world once admired us for our economy, and we told them if you wanted to be like us, here’s what you have to do—hand over power to the market. ¹⁵ Individualism: Rights and Freedoms vs. Responsibilities to Social Justice The objective of achieving a more equitable sharing of America’s economic productivity with all who contribute to its acquisition has been periodically proposed by adjustments to corporate and individual federal income tax policy, including inheritance tax rates, and by regulation of fluctuating economic and monetary conditions. However, such government actions are typically met with antagonism and portrayed as an affront to American individualism, democratic capitalism, and free market economics: a socialist conspiracy to take over a democracy. Unfortunately, many Americans, misled by the fiction of political rhetoric, seem unaware that economic success in a democracy is dependent on longterm equitable sharing of a society’s productivity and profitability. Indeed, the concept is fundamental to the existence of a dynamic middle class

economy, upon which an advanced social order achieves and maintains economic stability. If the middle class, as the engine of the national economy, is not equitably earning, adequately spending, and socially satisfied, the economic system will suffer, and the wealthiest will inherently become less wealthy as the poor become even poorer. It is noted that Athens in the fifth century BC resolved a serious economic dispute between aristocratic landowners and middle class merchants by utilizing the principle of “economic individualism tempered with socialistic regulation.” Importantly, the concept of equitably sharing the fruits of national productivity, as applied to capitalism in a democratic society, should not be confused with equal shares for all members. Will Durant, with reference to ancient Greece, notes: At the basis of this democracy [Athens] and this culture lies the production and distribution of wealth. Some men can govern states, seek truth, make music, carve statues, paint pictures, write books, teach children, or serve the gods because others toil, grow food, weave clothing, build dwellings, mine the earth, make useful things, transport goods, exchange them, or finance their productions or their movement. Everywhere this is the foundation. ¹⁶ The distribution of wealth, within a democratic society, is based on the concept of social justice, which recognizes the necessity for some degree of inequalities of income, wealth, and benefits, but within a just society. John Rawls, in A Theory of Justice , addresses the importance of justice within a social order: Justice is the first virtue of social institutions, as truth is of systems of thought. A theory however elegant and economical must be rejected or revised if it is untrue; likewise laws and institutions no matter how efficient and well-arranged must be reformed or abolished if they are unjust. ¹⁷ Two principles of social justice relate to the basic structure of a democratic society: First, all persons have equal rights to all basic liberties available to others in a system of natural liberty. Second, economic and social inequalities must be efficient and to everyone’s advantage, with related positions of authority open to all based on ability (i.e., an open social system). John Rawls defines the concept of social justice as being a society’s standard, representing the benefits and burdens of mutual cooperation. It provides a social order with its fundamental structure, “the way in which the major social institutions distribute fundamental rights and duties and determine the division of advantages from social cooperation.” ¹⁸ This concept encompasses social, economic, and political systems and addresses basic liberties, justice as fairness, economic competition, and owning property. More specifically, Rawls addresses the equitable and just distribution of income, wealth, benefits, and authority within the framework of a democratic society. He notes: Inequalities of wealth and authority are just only if they result in compensating benefits for everyone   .   .   .   . There is no injustice in the

greater benefits earned by a few provided that the situation of persons not so fortunate is thereby improved. The intuitive idea is that since everyone’s well-being depends upon a scheme of cooperation without which no one could have a satisfactory life, the division of advantages should be such as to draw forth the willing cooperation of everyone taking part in it, including those less well situated. ¹⁹ Thus, a just society inherently endorses and values the initiative of individuals to excel and benefit socially, economically, and politically. But, importantly, he stresses, the expectation also exists for the collective successes of individuals and the business sector to provide some opportunities and advantages for the less successful. All ethical doctrines worth our attention take consequences into account in judging rightness. ²⁰ American society has become polarized, with one segment remaining loyal to the fundamentals of Athenian democracy and the concepts of social justice and an equitable distribution of wealth among its citizens as necessities for a stable, prosperous, and satisfying society. The opposite segment, often referred to as the “I earned it and I have the right to keep it” crowd, confuses the democratic principle of equitable wealth distribution with the objective of equal wealth for all persons. This crowd conveniently ignores the reality that an individual’s earnings are made possible by the whole of society and its generalized economic prosperity and stability: “It takes a village.” Some even view assisting the less fortunate by means of government taxing their earnings to be thievery and contrary to true democracy and to the wisdom of the Founding Fathers. Gar Alperovitz and Lew Daly in Unjust Deserts: How the Rich Are Taking Our Common Inheritance and d Why We Should Take It Back emphasize the cumulative assets of a social order in providing access of a current generation to opportunity to succeed. If much of what we have comes to us as the free gift of many generations of historical contribution, there is a profound question as to how much can reasonably be said to be “earned” by any one person, now or in the future. ²¹ Elizabeth Warren comments, “There is nobody in this country who got rich on his own. Nobody. You build a factory out here, good for you.” But she notes that the “rest of us paid for” the roads, educating the workers, and the police force that made it possible. “Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who is coming along.” ²² Thus, the distinction is not solely with capitalist ideals of producing great wealth but also with the implementation of the democratic principle of equitably sharing productivity in a just and fair manner among those who created it. Clearly, a democratic society should expect capitalism to create wealth inequalities but, at the same time, accept that economic prosperity should also benefit, to some just degree, all citizens.

For decades, America has been unable to sort through basic socio-economic variables and adopt a rational model founded on social justice. Rather, corporate-political alliances continue to promote irrational, incompatible political and economic ideologies based on self-serving objectives, which have created excessive societal disorder. The US cultural profile includes the lowest tax rates and greatest income inequities since pre-Great Depression days while supporting deficient expenditures for education, infrastructure, science, energy, innovation, and prevention of social problems. Based on quantitative measures of global socio-economic national performances, this profile is fundamentally incapable of creating long-term social and economic stability. Accordingly, America’s Achilles’ heel is greed. The wisdom expressed by Supreme Court Justice Oliver Wendell Holmes Jr. is “I like to pay taxes. With them I buy civilization.” ²³ Unfortunately, this concept is incomprehensible to many in today’s materialistic society. America is not in the mood to “buy civilization”; the price is too high for some. Equally unfortunate is the unconscionable state of American politics that has orchestrated this process of cultural degradation. Inequality and Social Cohesion, Trust, and Status It is critical to the success and longevity of nations (and organizations) for their members to pursue common objectives. An implicit assumption is that individuals, whether out of necessity or by choice, are willing to make serious commitments and work toward common outcomes, representing quid pro quo benefits based on established, agreed upon criteria. Thus, a healthy motivation of investing one’s self (and perhaps personal resources) into the community may be viewed as a balance between self-seeking individualism, looking to acquire personal financial, emotional, social, and political benefits, and societal-oriented individualism, being willing to utilize one’s talents for the benefits of the total membership. In this manner, success and trust gradually become mutually reinforcing societal strengths, which stimulate cooperation, consensus building, and a confidence of success among the membership. Whereas social and economic outcomes, perceived as being excessively unequal and inequitable, will ultimately erode trust, social cohesion, and social relationships. In his book The Moral Foundations of Trust , Eric Uslaner assert that social and economic inequality affects trust, not the reverse, and trust leads to cooperation. He concludes, “Trust cannot thrive in an unequal world” and income inequality is the “prime mover” of trust, possessing a more intense and broader influence than economic issues such as unemployment rates and inflation. ²⁴ He demonstrates that, from 1960 to 1998, trust in America declined rapidly, as income inequality sharply increased. Putman, in Bowling Alone , points out that “in terms of the distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a century… . Those same decades were also the high point of social connectedness and civic engagement. Record highs in equality and social capital coincided… . Conversely, the last third of the twentieth century was a time of growing inequality and eroding social capital… . The timing of the two trends is striking: Sometime around

1963-70 America reversed course and started becoming both less just economically and less well connected socially and politically.” ¹ Interestingly, these timelines correspond to Robert Reich’s designations of “stages of modern American capitalism”; 1947-1975 was earmarked as one of “more broadly shared prosperity… the strongest economic growth in the history of the world,” which subsequently evolved into the post-1970s stage of “increasing concentration” of income and wealth, leading to the Great Recession. ²⁵ Reich’s data analysis and the findings of Uslaner and Putnam point to instructive interrelationships among America’s growing wealth inequality and declining trust, “eroding social capital,” becoming “less just economically and less well connected socially and politically,” and declining egalitarianism. These representations of the ramifications of excessive wealth inequity also provide an enlightening perspective for such international findings. Recall that in 2010, nations with greater income equality, as depicted by Wilkinson and Picket, consistently had higher rankings of well-being, as measured by health and social problems, across their total populations and for a variety of problems. Thus, at some point in the expansion of the wealth inequality gap, a nation creates significant, self-defeating socio-economic problems, which begin to erode the middle class, the economic engine of growth and stability. Subsequently and typically during economic “lulls,” as during America’s 1990s, the government begins to recklessly and unwisely reduce social services and public benefits, while neglecting lessons from the Great Depression and failing to stimulate the economy, thus precipitating the transition of the economic “lull” to a “regression.” Concurrently, social trust and the sense of fairness are incrementally violated as the economy continues to falter, constituting a major breech of the social contract. The loss of established trust and confidence in the common cause, which had existed to a greater degree during more egalitarian times and was displaced within a more hostile environment, diminishes social connectedness, reduces civic engagement, and erodes social capital. Understandably, for the lower socio-economic segment of the population, expanding inequality of wealth generates anxieties, fears, and threats to long-held aspirations, which leads to a diminished sense of well-being. Threats to self-confidence, self-worth, and status are associated with the loss of class identity within one’s existing social hierarchy, as accepted material markers of status define, reinforce, or diminish self-esteem and standing among one’s peers.

The competition for status and climbing the socio-economic ladder utilizes markers of power, wealth, and social position to achieve perceived success. Such markers are provided by business sector innovations to develop products and services; corporations create marketing and financial strategies to convince people to buy products they never thought they needed and probably can’t afford. Home ownership and the acquisition of cloths, cars, and jewelry serve as weapons in the competitive struggle for status and self-esteem, escalating conspicuous consumption that continuously redefines and raises the standard of being adequate. In recent decades, the consequences of this competition include record personal debt, multiple part-time jobs, both spouses working, and long work weeks, motivated by a need to reach materialistic goals. Wilkinson and Pickett note: Our almost neurotic need to shop and consume is instead a reflection of how deeply social we are. Living in unequal and individualistic societies, we use possessions to show ourselves in a good light, to make a positive impression, and to avoid appearing incompetent or inadequate in the eyes of others. ²⁶ In summary, individuals who are unable to acquire sufficient material markers and a perceived high status within a social hierarchy may no longer desire to be contributing members of society. Analyses of statistics of intercity violence attest to the importance of respect and status to selfsurvival as well as to social stability. Accordingly, intense, generalized social dissatisfaction, based on perceived inadequate economic opportunities, incentives, and rewards and a lack of fairness, create a loss of faith, confidence, and satisfaction within economic and political systems. This precipitates massive and passive withdrawals of commitments to society’s agenda and allegiances, as individuals refocus their priorities on survival and self-sufficiency. This decline in social and civic responsibilities and active support of the public good drives a socio-cultural transition toward excessive self-oriented individualism, greedy materialism, and a sensate mentality, exemplified by American society in the late twentieth and twentyfirst century. America must now await the next contraction of income inequality in order to re-establish a vigorous middle class economy. This will necessitate greater creativity, inventiveness, and self-discipline; it will also require new discoveries, knowledge, and commercial niches of excellence to stimulate and restore the nation’s economic strength and uniqueness. However, the first priority must be to achieve cultural modifications that reorient the nation’s ethics, values, and integrity in order to neutralize the excessive political influence of corporations and wealthy individuals; to re-establish the work ethic, the discipline of mind, body, and spirit within the population; and to reduce individualism in favor of a culture dedicated to social justice and the common cause. Chapter VI Narcissistic Individualism and Darwinian Economic s : The Role of Social Capital and Human Behavior

In several surveys in 1999 two-thirds of Americans said that America’s civic life had weakened in recent years, that social and moral values were higher when they were growing up, and that our society was focused more on the individual than the community. More than 80 percent said there should be more emphasis on community, even if that put more demands on individuals. ¹ Robert D. Putnam Historically, one of the clearest symptoms of when earlier great Western nation-states struggled in the throes of sustained cultural degradation and loss of global preeminence has been a waning enthusiasm of its citizens for collaborating with each other in civic, religious, professional, and social matters. This decline in the commitment of individuals to come together and directly participate in activities traditionally devoted to performing good works, seeking approaches to solving community problems, and providing a strong national voice on important social, economic, and governmental matters represents a declining social cohesion, the glue that binds societies to a common purpose, mission, and agenda. Nowhere in America is this more prevalent than in Washington politics. During the last three decades of the twentieth century, social and family bonds, volunteerism, and civic engagement in America have undergone significant transitions. People have become less connected and interactive, reflecting a less compassionate and altruistic attitude toward others. By the turn of the century, a wide range of traditional bedrock civic and social community and national organizations had lost significant membership, constituting a serious loss of the nation’s vitality and stabilizing social, economic, and political influence. The networking structures of such groups have historically been instrumental in successfully building and maintaining social cohesion and social capital, often referred to as civic virtue . This serves as a measure of the strength of societal-oriented individualism within a social order, contrasting a more self-oriented and selfserving individualism, exemplified by America’s narcissistic shift in the twenty-first century. Unfortunately, the totality of this diminished grassroots, constructive involvement and talent constitutes lost opportunities for advancing a progressive economic and social agenda, ranging from the community to the national level. This reduction of invested civic virtue over more than three decades is a serious loss of critical human capital, the importance of which is comparable to that of financial and natural resources. Therein lays one of many factors underscoring America’s cultural degradation. Uncoupling and Disengaging from Community Involvement From 1973 through 1994, the Roper survey organization polled over four hundred thousand Americans regarding their participation in civic and political activities. They found that “the frequency of virtually every form of community involvement… declined significantly, from the most common— petition signing—to the least common—running for office.” ² For example, the number of people attending at least one public town or school meeting

within a twelve-month period declined by 40 percent. An equal percentage of decline occurred for those serving as an officer or committee member for any local club. Robert Putnam, in Bowling Alone, points out that, relative to the mid-1970s, “we have sixteen million fewer participants in public meetings about local affairs, eight million fewer committee members, eight million fewer local organizational leaders, and three million fewer men and women organized to work for better government.” Across all activities, the average decline was 10 percent from 1973-74 through 1983-84 and 24 percent between 1983-84 and 1993-94. In total, the two-decade decline represents one-third of the number of people not involved in any of these civic activities. Significantly, those activities that require individuals to serve, work, and attend, and thus become directly engaged with other people over a sustained time period in the service of a better community, have declined the most. In contrast, forms of involvement requiring only a singular activity, such as writing a magazine article or a letter to a member of congress, making a speech, or signing a petition, declined the least. That is, activities that require little time, effort, and engagement with others, which are of a more self-promoting nature, are most highly preferred. ³ The culprits of civic disengagement include television viewing, urban sprawl, and the pressures of time and money. But even adults outside large metropolitan areas who did not spend a great deal of time watching TV became disengaged from their communities, to a considerable extent. Compared to the 1970s, this segment of the population “went to half as many club meetings in 1990s… and are five times more likely to be entirely disengaged from community life.” Between the early 1970s and the late 1990s, even attendance at town meetings in small Vermont villages declined by about half. ⁴ A significant generational effect was also detected, as each older generation was more active in more organizations, attended church more often, voted more regularly, volunteered more often, and worked on more community projects. Gen Xers, born between 1965 and 1982, were found to be more materialistic than their predecessors were in their younger years, but no more than the boomers (1946-1964) had become. Declining Religious, Social, and Professional Involvement

The number of national nonprofit organizations doubled between 1968 and 1997, but median membership declined from about 10,000 in 1962 to about 1,000 in 1988. The significant increase in voluntary organizations represented, to a great degree, those that require little, if any, participation with other members, thus contributing little to the nation’s social cohesion. Consequently, there has been a significant decline in active participation within an increasing number of organizations, many of which only have dues-paying responsibilities. Many of these memberships were based on services for a fee or a desire to promote social, religious, or political agendas. It is noteworthy that between 1990 and 1997, parent-teacher associations (PTAs) lost half a million members, even as public school enrollment increased by about five million and the number of families with school-age children increased by two million. ⁵ Data pertaining to the trends of American religious institutions are equally revealing. “America is one of the most religiously observant countries in the contemporary world.” ⁶ But interestingly and contrary to popular myth, the colonists were not overly religious, and in 1776, the rate of formal religious adherence was only 17 percent. E. Brooks Holifield contends that “from the seventeenth century through the twentieth participation in congregations has probably remained relatively constant.” Only about 35 to 40 percent of the population has participated in religious services on a regular basis during the last three hundred years, and formal participatory involvement in church non-service activities has significantly declined. ⁶ Nationally, church membership increased from the 1930s to about 1960, leveling off, and then declined by about 10 percent between the 1960s and 1990s. Of all Christian denominations in America, only the evangelical groups have increased market share over the last forty years. However, “whereas the mainline churches participated in progressive social betterment programs during the first half of the twentieth century, evangelical churches focused more on individual piety.” This trend for all Christian denominations constitutes a net decline in the nation’s total civic and social interchange, a reduction in social capital. ⁷ According to Robert Wuthnow: Religion may have a salutary effect on civil society by encouraging its members to worship, to spend time with their families, and to learn moral lessons embedded in religious traditions. But religion is likely to have a diminished impact on society if that is the only role it plays. ⁸ Thus, declining religious participation, which has contributed to diminishing social capital in America during the last half century, may be attributed to declining church attendance, but more significantly, “the churches we go to are less engaged with the wider community. Trends in religious life reinforce rather than counterbalance the ominous plunge in social connectedness in the secular community.” ⁹ Labor unions as well as business and professional organizations have traditionally contributed greatly to catalyzing social cohesion in America. But from 1953 to 1997, union membership declined by 62 percent in manufacturing, 79 percent in mining, 78 percent in construction, 60 percent

in transportation, and 40 percent in the service industries. According to Farber and Krueger, “Virtually all the decline in unionization between 1977 and 1994 seems to be due to decline in demand for union representation.” Putnam suggests that “fewer workers wanted to join… . The problem with union membership is not so much skepticism about the idea of ‘union’ as skepticism about the idea of ‘membership.’” ¹⁰ He cites Peter Pestillo: “The young worker thinks primarily of himself. We are experiencing the cult of the individual,” rejecting the traditional comfort of the coalition. ¹⁰ In contrast to declining union membership, those of professional associations have dramatically increased, from about 9 percent of the population in the 1950s and 1960s to about 18 percent in the 1980s and 1990s. Also, professional and academic societies have increased membership from 13 percent in 1974 to 18 percent in 1994. These membership increases represent an exception to the general trend of declining organizational membership in America. However, during this period, this positive trend follows the same general fluctuating pattern: “growth in sociability during the first two-thirds of the century, followed by sudden stagnation and then decline during the last third.” ¹¹ Overall, socialization and camaraderie related to the workplace, whether onsite or off-site, has not increased in the last few decades, and the social capital contribution of a larger workforce has not compensated for reductions from the individual sectors of society. The data raise obvious questions related to the nature of specific activities directly attributable to American’s net reduction in participation in the work of civic, spiritual, professional, and social organizations and the degree to which each affects social cohesion and social capital. Also, the identification of the population’s use of the resulting time deficit and the underlining rationale for this socio-cultural transition provide valuable insights into the nature of cultural change. Over the last few decades, these cultural trends indicate that the American population derives insufficient personal satisfaction from contributing their time to interact with others for constructive outcomes that benefit other people and the common good. This trend, which reflects shifting attitudes, values, and behavior over the last half century, is consistent with a decline in societal-focused individualism, which places a premium on being a constructive contributor to societal trust, interconnectiveness, interdependence, and cohesion. Recall the discussion in the last chapter of a more self-oriented individualism , characteristic of a later-stage cultural growth phase that constitutes a highly self-centered mentality and an addiction to selfgratification and materialism. Such behavior is motivated by envisioned personal incentives, rewards, and happiness rather than satisfaction from contributing to the well-being of others and the public good. To comprehend this significant modification of cultural attitudes and priorities associated with the expenditure of one’s time, money, and effort, it is instructive to examine the trends of specific activities. Accordingly, Putnam provides a valuable data set to address this objective, illustrating that “Americans connect with one another… less and less every year,”

resulting in a gradually declining cultural cohesion. ¹² Informal social connectedness declined in all parts of American society. Appropriate examples from the last quarter of the twentieth century include the following: • Less home entertainment among friends; the “pace of decline in social visiting… has been extraordinary.” • Fewer family members sharing the evening meal together; “virtually all forms of family togetherness became less common.” ¹³ • Sharp decline of married couples and single persons going out to restaurants, bars, and discos; staying home in the evening has become the standard practice. The exception was an increase in frequenting of fast-food places and classy coffee bars. • Declining frequency (by 50 percent) of adult card playing between 1981 and 1999. • Declining frequency (by one-third) of social evenings within the neighborhood; “we allocate our time—toward ourselves and our immediate family and away from the wider community.” ¹⁴ • Declining participation rates in sports, exercise classes, and physical fitness programs as a fraction of the population, except for older citizens. ¹⁵ • Declining bowling league membership between 1980 and 1993 by more than 40 percent, even as bowling popularity increased by 10 percent. ¹⁶ • Less time engaged in sports while more time and money is spent watching sports; attendance for major auto racing and college and professional sports has almost doubled. ¹⁷ • Declining church attendance and club meetings, while attendance at art museums, movie theaters, music concerts, and other such entertainment venues has increased. ¹⁷ • Declining frequency and number of people playing a musical instrument and taking lessons, but interest in listening to music has not declined. ¹⁸ • Sharply declining donations from earned income after having nearly doubled from 1929 to 1960, considered a measure of one’s altruism; “trends in American philanthropy relative to our resources are dismaying, for in the 1990s Americans donated a smaller share of our personal income than at any time since the 1940s.” ¹⁹ • Declining rate of volunteering tripled among people who never attended either church or club meetings. ²⁰ The erosion of social capital, according to Putnam, is extensive: Social capital has eroded among the one in every twelve Americans who have enjoyed the advantages of graduate study, it has eroded among the one in every eight Americans who did not even make it into high school, and it

has eroded among all strata in between. The mysterious disengagement of the last third of a century has afflicted all echelons of our society. ²¹ Mysterious Social Disengagement: Pursuit of the Good Life Putnam demonstrates in impressive detail that America’s “mysterious social disengagement” is only partially explained by the usual suspects of constraints of time and money, longer work hours, urbanization, and women entering the labor force. Perhaps surprisingly, the most significant element is reported as excessive devotion to entertainment, which is strongly associated with shifting generational priorities, relaxed values, and a lack of self-discipline. The use of people’s free time has undergone an appreciable transition, which has resulted in a general reduction of the country’s civic engagement and consequently its stock of social capital. As an example, keeping up with current events has traditionally been an important component of people’s leisure time. However, the priority of following the news of the day has significantly been reduced in recent decades, as reflected by declining newspaper readership and ratings for evening TV news shows. Significantly, these once primary sources of local, state, national, and international information inputs are not being replaced quantitatively or qualitatively by Internet news sources or other electronic media, as is often assumed. Putnam says, “Most of the time, energy, and creativity of the electronic media, however, is devoted not to news, but to entertainment… the most fundamental fact about the impact of television on Americans. Nothing else in the twentieth century so rapidly and profoundly affected our leisure.” ²² Two points illustrate the dominance of television in American life. First, 75 percent of households acquired television sets within seven years of TV entering the marketplace, and currently 99 percent of households have at least one set, with the national average being 2.24, and 66 percent have three or more TV sets. Second, the culture has adopted the habit of continuously having the television set on as a background noise sedative, regardless of what is playing. This habit has increased from 29 percent of adults in 1979 to 43 percent by the end of the 1980s. ²³ Robinson and Godbey found that American’s TV viewing represented 40 percent of the average person’s free time in 1995, but that had increased since 1965 by one-third. Accordingly, almost all of the corresponding sixhour gain per week in leisure time from 1965 to 1995 was spent watching TV. As a consequence, Americans in vast numbers have become bonded with their television sets, resulting in spending more time at home, which is the location for engaging in eight out of ten of the favorite leisure time activities. ²³ Heavy television watching by young people is associated with civic ignorance, cynicism, and lessened political involvement in later years, along with reduced academic achievement and lower earnings later in life. ²⁴ The data clearly show that the decline of participation in activities that promote social capital is a highly generational phenomenon. The older adult age groups are involved in a wider variety of civic and social activities than

younger generations. Generational or “intracohort” influence was the most significant effect on social change in the twentieth century. Putnam attributes, on a relative basis, “the decline in civic engagement and social capital” as 25 percent due to “electronic entertainment” and 50 percent due to “generational change.” ²⁵ Surprisingly, perhaps, data representing civic engagement for four age groups, from eighteen to twenty-nine to over sixty, clearly show older adults as more actively engaged than younger people. In a 1975 Roper poll asking people to identify elements of “the good life,” 38 percent of all adults selected both “a lot of money” and “contributing to society.” In 1996, “contributing to society” declined to 32 percent while “a lot of money” increased to 63 percent. Other elements of the good life that became more important during this timeframe included vacation homes (19 to 43 percent), second color TV (10 to 34 percent), travel abroad (30 to 44 percent), job paying higher than average wage (45 to 63 percent), swimming pool (14 to 36 percent), second car (30 to 45 percent), and “really nice” clothes (36 to 48 percent). Conversely, elements of declining or unchanged priorities included a happy marriage (84 to 80 percent), children (74 to 72 percent), and “an interesting job” (69 to 61 percent). Shifts were all consistent with generational replacement. ²⁶ The generational analysis demonstrated that with the passage of time and the incremental decline of the older population, the prevailing national priority assigned to patriotism declined, acquiring money increased, and seeking “self-fulfillment” increased. These generational profiles provide strong evidence for America’s sociocultural transition during the last half century, evolving from a more cohesive, compassionate, civil, and spiritual cultural mentality to a selfcentered, thrill seeking, materialistic society. America’s loss of selfdiscipline, its turning away from altruistic values, and its disregard for the serious work ethic and educational rigor that was historically associated with periods of impressive human inventiveness, creativity, economic growth, and social progress all represent a society undergoing cultural degradation. There is a high degree of correlation between these characteristics within the American general public and the attitudes, values, and behavior of the nation’s political, corporate, and financial institutions, as well as the professions of law, medicine, and accounting. The trend is universal within American society. How did we get to this place? Each succeeding generation has increasingly adopted a more narcissistic individualism, dedicated to a self-oriented set of priorities, the pursuit of self-gratification, and the accumulation of the materialistic elements of “the good life.” As a result, there has been a mass abandonment of civic responsibilities; people no longer strive to become active participants in creating and maintaining a more cohesive, progressive, and just social order. In 2012, E. J. Dionne addressed the intensity of the nation’s cultural transition:

Radical individualism is as close to triumph as it has been at any point since the Gilded Age. Whether it will succeed or fail is now the central question in American politics. ²⁷ Human Nature, Values, and Behavior: Variables of Social Change During the last half century, America has become exponentially more complex, competitive, disorderly, and dysfunctional, which has paralleled each generation becoming less willing to actively participate in and contribute to the vital processes of a democratic society. The general public is less informed about social, economic, and political matters and is increasingly disinterested in carrying out the responsibilities and duties of citizenship and in participating in civic and social affairs than in previous decades. The resulting decline in social capital represents a significant and accumulating loss of potentially unifying assets of active and fruitful interactions among people possessing common interests, aspirations, and goals. Clearly, the potential power of such networking has immeasurable social, economic, and political ramifications. Therefore, it is instructive to examine these trends of systemic, generational-based losses of social cohesion and shifting human values, attitudes, and behavior from the point of view of how this phenomenon affects economic growth and social stability. That is, what is the big picture of America’s post-Great Depression socioeconomic revival, which has turned into another era of failed human behavior, immense human suffering, and irreversible damage to American society? Social scientists have long pondered the nature and influence of the variables affecting short-term socio-economic fluctuations and the driving forces of longer-term, major socio-cultural transitions. Typically, such investigations identify an arbitrary and restrictive number of cultural properties and characteristics, which are revealed from spiritual, economic, and socio-political behavior, most often associated with noteworthy historical accomplishments, failures, and events. Based on such direct cause-and-effect investigative methodologies, speculative, comprehensive visions of multivariant, integrated past societies have been envisioned. In this manner, investigators presume it possible to gain fundamental insights into and explanations for exceedingly complex societies, observing, for example, the genesis, growth, stagnation, and collapse stages of the ancient Greek and Roman civilizations. This has been the typical mechanism by which social scientists explain human history.

Pitirim Sorokin identifies two significant weaknesses of a sole reliance on this typical social science methodology that assumes “a causal-functional integration among the parts” of a social order. First, he notes that not all cultural components and complexities are linked together causally or functionally; some possess “logico-meaningful” associations. “Every conglomeration of cultural objects does not constitute a functional unity or connection among all cultural components.” Second, he demonstrates an appreciation for both the enormous complexity and vast number of variables capable of influencing the infinite array of potential processes of cultural integration, differentiation, and segmentation. ²⁸ The causal-functional and the logico-meaningful methods of integration both act as the means of ordering into comprehensible systems the infinitely numerous and complex phenomena of the socio-cultural world,   .   .   . [which] consists of endless millions of individual objects, events, processes, fragments, having an infinite number of forms, properties, and relationships   .   .   .   . The universe is infinite: unbounded in space and time and infinitely complex   .   .   .   . It cannot be known and understood through direct sensory perception   .   .   .   . The same is true for the socio-cultural universe. ²⁹ Importantly, these two conceptual methodologies are consistent with modern advancements in the science of complex systems and chaos theory; they are of much greater significance than was appreciated in Sorokin’s era. They are discussed in chapter XI. Recall that in the early twentieth century, Sorokin, pondering the history of Greco-Roman Western civilizations, rhetorically framed the question as “Where shall we look for the roots of change of socio-cultural phenomena?” He responds that the system “bears in itself the seeds of its change” and is driven “by virtue of its own forces and properties.” ³⁰ Sorokin recognizes that societies in their genesis and early growth periods exhibit substantially different cultural values and ethics than in their more mature growth period. In the early developmental stage, the fear of physical and economic survival is sufficient motivation to perpetuate a society’s prevailing altruistic values of cooperation, consensus building, communal-oriented priorities, and the steadfast ethic of principle. However, in the late growth stage, the existence of great wealth, beyond the level necessary to maintain basic subsistence, transforms human fear for survival into human greed and anxiety about not being successful in the competition for additional, abundant socio-economic rewards. The mere potential of new financial opportunities and additional sources of wealth ignites competition among and within cohorts, who quickly envision the enhancement of their relative status in society . The acquisition of material and nonmaterial positioning assets, the perceived values of which are based on their situational context, bestows an individual with a given marginal status. For example, the most expensive house in the most exclusive neighborhood, with a Rolls-Royce in the garage and whose owner wears a gold Rolex watch and is the president of a major multinational corporation, qualifies her as a major player. Her top marginal status is based

on the situational context of the neighborhood, state, and nation as a result of her highly valued material and nonmaterial positioning assets and corresponding social and political influence. Thus, a portion of Sorokin’s “roots of change of socio-cultural phenomena” may be attributable to a human psychological need to win the competitive consumption race and to accumulate sufficient positioning assets to achieve a desired, fulfilling status and produce personally relevant achievements. Accordingly, the interaction of human behavioral psychology and cultural values during the pursuit of socio-economic opportunities defines a mechanism whereby individuals seek wealth, status, and power. The potential outcomes constitute major incentives and rewards; these are prime motivators of the roots of change, which, in due course, define the routes of socio-cultural transitions. In the process, a few individuals will always prosper, while the rest of society may benefit to some extent or be left out. The personal financial success of Wall Street executives at the time of the Great Recession, despite their complicity in creating a global financial disaster, provides a historic example of enormous individual success and derived benefits at the expense of significant suffering and long-term losses by millions of individuals and the nation in general. Values and Morality Affecting Economic Behavior Behavioral economics, according to Robert Frank in The Darwin Economy , functions “at the intersection of economics and psychology,” focusing” focuses “on systematic biases in people’s judgments and decisions.” ³¹ But clearly, this newly evolving subdiscipline of economics relies heavily on cultural values, attitudes, and ethics as being powerful influences on human behavior. Conceptually, economic outcomes are also associated with Sorokin’s logico-meaningful methodology of ordering random, related fragments of cultural information according to logical relationships that provides central meaning, which may or may not have obvious cause-andeffect connections. Familiar examples include the predictions of hurricanes and eruptions of volcanoes. Fragments of obviously related but disparate national weather data are accumulated and framed, as in piecing together a jigsaw puzzle, in order to gain insights into next week’s local weather. In contrast, the mathematical formula expressing Newton’s law of gravity establishes uniformity among all of the variables that contribute to the cause-and-effect relationship; there is no guessing or debating about possible outcomes. It is noteworthy that during the last three decades, the economics profession, which mainly focuses on cause-and-effect relationships, has been hard-pressed to claim much global success in providing effective intellectual and pragmatic leadership. John Maynard Keynes noted, “Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world.” ³²

As an example, a major and persistent shortcoming of modern economics is the clear and obvious exclusion of human cultural values and morality as key variables of economic policy, which, as the middle class knows all too well, is associated with “problems of the actual world.” Unfortunately, economists tend to treat human behavior as an unquantifiable parameter that is best ignored, due to either its inherent complexity or its lack of scientific rigor. There simply isn’t an equation that contains morality as a variable for them to measure; hence, this obvious major factor is conveniently omitted from consideration. However, economic recessions, rather than being attributable to defective theoretical economic models, have been the result of persistently flawed, outrageous human behavior. As a result, Western industrialized nations have been unable to maintain highly efficient individual and collective market systems that provide optimal socioeconomic outcomes that are even marginally consistent with the principle of social justice. In 1927, Alfred Marshall captured the essence of many economic studies: The economist studies mental states rather through their manifestations than in themselves; and if he finds they afford evenly balanced incentives to action, he treats them prima facie as for his purposes equal. ³³ The founding father of behavioral economics, Amos Tversky, states, “My colleagues, they study artificial intelligence. Me? I study natural stupidity.” ³⁴ Appropriately, it is useful to link concepts of behavioral economics and “systematic biases in people’s judgments and decisions” with the major contributing factors to the Great Recession, which have evolved from the 1970s and greatly intensified since. Accordingly, it is instructive to examine the forces and properties that appear to have been at the heart of enormous socio-economic changes from the 1980s era through the nation’s financial and economic collapse and into the post-Great Recession efforts of the 2010s. Much is known, after the fact, about what functionally occurred within Western nations as their socio-economic and financial worlds degenerated into chaos. Understanding defective human values and behavior may provide valuable lessons, as there were no foreign invasions, famines, global epidemics, or energy shortages, historically ascribed to the stagnation and collapse of great civilizations. First, the historic “basic bargain” of America capitalism between business and labor, intended to share the nation’s prosperity equitably in order to fuel a continuing, growing middle class economy, was shattered due to flawed human values and behavior, not because the bargain was conceptually defective. Thus, the obvious outcomes of a sharp, disproportionate threedecade increase in income for the wealthiest Americans and a corresponding substantial loss of middle class income were realized. Predictably, a stagnant middle class economy produced a declining rate of economic growth and increasing unemployment, bankruptcies, and foreclosures. The behavior that produced the Great Depression was repeated.

Second, the economic model of self-correcting markets and the concept of free trade, as assumed and promulgated by former Fed Chairman Alan Greenspan and based on Adam Smith’s theoretical “invisible hand,” have proven to be drastically flawed. The “hand” has often been represented as the right of individuals and institutions to freely pursue their individual business interests as a “fundamental human right” in a free market society without government interference. Absurdly, this extreme economic view became prevalent once more in American history in order to justify extreme immoral and flawed behavior. Such misplaced faith in human behavior, and specifically in the business community, ignores the long behavioral history of the robber barons and, more generally, the corporate and investment banking sectors. The “freedom of the invisible hand” assumes that the marketplace will be maintained and protected via self-regulation (i.e., by the integrity of those within the industry, who supposedly recognize and respect the need for a sound, long-term economy and the avoidance of corruption and fraud). In today’s environment, such assumptions qualify as a sick joke. In recent times, the self-regulation attitude has been extended to insinuate, if not to definitively state, that government has little if any role in monitoring a free market economy and that for-profit business entities have little, if any, responsibility to provide for society’s common good. David Rothkopf comments, “History has shown that often that hand has been more than invisible, it has been absent. And sometimes history has also shown the alternative: an iron fist wrapped in an invisible glove.” ³⁵ Third, individual and public debt have become unsustainable, as credit has been recklessly and wastefully expanded. As public debt has irrationally ballooned, tax revenues as a percentage of GDP have declined due to record low income tax rates and tax loopholes. Historic personal debt and mortgage foreclosures have resulted from an expenditure cascade of consumer consumption in a futile attempt to keep up with the escalating cost of achieving an adequate “marginal status” in modern America. Individual perceived needs that conform to community standards and permit the attainment of a desired status have propelled an irrational consumer economy. As a percentage of GDP, the American population’s savings declined from an average of 9 percent in 1959 to 4 percent in 1992, and debt rose from 44 percent of GDP in the 1960s to 78 percent in 2002. ³⁶ During the period from 1947 to 1975, American consumption was constant, at 62 percent of GPD, but reached 75 percent by 2008, compared to Britain’s 65 percent, Germany’s 55 percent, and Japan’s 52 percent. In 2007, the typical new American home was 2,500 square feet, 50 percent larger than in 1977. The typical wedding in 1980, adjusted for inflation, cost $11,213, increasing to $28,082 in 2007. ³⁷ Fourth, excessive government spending has persisted for over three decades, exemplified by funding elective military actions to subdue unfriendly, nondemocratic foreign leaders and presumed threatening political ideologies. These wars cost trillions of dollars, which could have been invested to promote the next scientific and technological quantum leap into future economic gains and to prevent the severe decline in health,

social, and infrastructure problems that now severely undermine the nation’s future. Human behavior is driven by attitudes, values, and ethics, which range from sound to defective, and individual aspirations toward achieving some degree of individual as opposed to societal outcomes. Perhaps the most striking lesson from America’s history during the period from the pre-Great Depression years to today is how little humankind learns from drastically inept, uncivilized behavior so as to avoid repeating crises such as the Great Depression. Individual Motivations, Aspirations, and Responsibilities Core behavioral questions include, What motivates and guides individuals in their work, family, civic, and social activities and in their duties and responsibilities? What dominates their thinking, attitudes, decisions, and behavior regarding their aspirations of personal success and satisfaction? How is their sense of being and behavior balanced by responsibility, commitment, and service to the success and common good of organizations, groups, and society? Responses to these core questions reveal a continuum of individual philosophies, values, and practices, between the extremes of altruistic individualism, which promotes an appreciation for compassion and community, and self-indulgent, egocentric individualism of a feel-good mentality, abundantly found in “overripe” mature civilizations such as America in the twentieth century. Importantly, individuals’ degree of happiness or despair (or of selfsatisfaction or disappointment) over the outcomes of rational choices may be dependent on the absolute quality of outcomes, relative to their adopted goal for personal accomplishment and satisfaction that exists in their mind. Based on a variety of possible personal circumstances, achieving a B—in a calculus course may be a very satisfying, prideful accomplishment for a particular individual. However, within a competitive group or social order, relative quality is often the measure of success, as in a nation achieving the highest international GDP rather than simply attaining a satisfying societal outcome, as viewed by the majority. Nation, group, or team success is usually viewed as being the best among the competition. A college basketball player may personally experience satisfaction by scoring thirty points in a particular game, but if his teammates lose the game by twenty points, they will experience unhappiness and failure. Likewise, some individuals may succeed financially as their institution (or society) suffers financial disaster (e.g., the financial collapse of Wall Street investment firms). Individuals (and social orders) being the best or being morally good is a relative concept; it depends on values, ethics, and anticipated performance, the context of the competition, and the perceived value of potential accomplishments. But how does the high scoring basketball player’s degree of personal happiness and satisfaction compare with his level of disappointment over his team’s loss and his compassion for the other team members? He may aspire

to play in the NBA and earn millions of dollars or to coach a high school team. What fuels his passion for competition to succeed, and what are his standards of success? Most importantly, how can striving for personal success be moderated and balanced with efforts to contribute toward meeting the needs of a team or society? These questions lead to contemplating motivations, aspirations, choices, and behavior that impinge upon social, economic, and political systems, which have repeatedly fostered socio-cultural transitions among the great civilizations. These include America’s transitions from colonial times through the Great Depression; continuing to the historic growth period of shared prosperity following World War II until the late 1970s; and finally to the post-1980s era of social, financial, and economic degradation, which continues through the post-Great Recession years. Contemplating the most recent shift from national prosperity to self-destruction, how did human behavior contribute to the outcome of this pathway? Robert Frank’s work in general, and more specifically in Falling Behind: How Rising Inequality Harms the Middle Class , provides history with a behavioral psychology background, which enables one to comprehend humankind’s competitive consumption race to achieve anticipated personal happiness, satisfaction, and success within a defined social domain. Important to this discussion, recall that in a society’s mature growth stage, relative to its genesis stage, the social order’s economic system has matured to the extent of typically creating prosperity and a “gold rush” mentality of opportunism for individuals to capture unprecedented financial success. Gone are the days when all members of society were intrinsically and strongly bound to a community, which inherently required everyone to perform critical roles and accept communal responsibilities so that all would prosper. Compare and contrast individual entrepreneurial opportunities and capabilities of the early American colonists with those of twenty-first-century life. During colonial times, the primary criteria for individual and societal survival reflected common outcomes, such as the motivation to work cooperatively and take care of each other, as others would assist you if necessary. This cultural mentality maximized the probability of achieving a common good for all members. However, in the later growth stage, individuals began winning the battles of economic competition, which increasingly became their prime motivator and desired outcome, as opposed to communal success. Cooperation then became an optional attitudinal strategy, but only if such elective behavior serves one’s economic, social, or political best interest. Competitive ruthlessness gradually became more evident than cooperation in assisting others to become successful. As a result, many individuals became financially and socially successful, while others fell into suffering and poverty. Human experience has taught many that greater individual freedom to survive and prosper encourages people to assume fewer, mostly elective societal duties in favor of seeking their personal sense of satisfaction, with only optional responsibilities for contributing to societal well-being. Unfortunately, such human attitudes, values, and behavior motivate

individuals to become more productive and financially successful, no matter what tactics are necessary, which may not be in the best interests of the present-day community or of future generations. Thus, particular aspects of human behavior may enhance an individual’s social and economic success and satisfaction, but regardless of particular individual behavioral outcomes, the social order may or may not benefit in the short or long term. This cultural reality is characteristic of the sociocultural transition from a social order in its infancy phase, such as colonial America, to a mature state of economic growth, whereby individuals have significant business opportunities and the personal freedom to become entrepreneurial and seek their personal fortunes. This phenomenon gives rise to a much higher order: a self-serving and ruthless competitive spirit in a new marketplace environment with a new set of business strategies, tactics, incentives, and rewards. In this socio-cultural transition from a more primitive colonial method of doing business to today’s evolving US economy, the old-fashioned marketplace values and practices often become deterrents to commercial success. Thus perhaps the most significant factor emerging from this transition affecting the long-term viability of the nation’s financial and economic stability is the radical revision of human motivations that dominate the new order of commerce in an era of great prosperity. New, more intense and self-serving objectives emerge, which are not always consistent with desirable societal benefits and long-term interests. Individuals strive to achieve outcomes they assume will provide them a sense of happiness, personal satisfaction, and well-being, referred to by psychologists as “human subjective well-being.” Not surprisingly, a person’s sense of subjective well-being is associated with individual aspirations and accomplishments, most generally from satisfaction derived from income and the accumulation of other material and nonmaterial assets. Additionally, such aspirations of future happiness determine priorities and manage expenditures for consumer goods and services. It is of interest to explore the psychological impact of inequalities of income, accumulated material wealth, and other representations on a person’s positioning assets that affect subjective well-being. Frank explores in great detail the question “Does money buy happiness?” He quips, “Perhaps those who say money can’t buy happiness simply don’t where to shop.” ³⁸ Based on a number of wide-ranging studies, Frank notes important relationships between money and “human subjective well-being”: • Within a given nation, while rich people are substantially happier than poor people, “relative income is a far better predictor of happiness than absolute income.” ³⁹ • Appreciable increases in relative income improve subjective well-being; conversely, significant declines reduce general happiness and satisfaction. • There exists a level of income, above which happiness changes little with increasing income, if the rate of growth is about the same for all recipients.

• Absolute income is not an appreciable contributor to happiness, except for a group where all suffer from great poverty, then everyone’s happiness increases when all receive an income increase. • The degree of happiness with one’s absolute income is dependent on one’s domain (i.e., happiness is related to relative position in one’s income and social strata). • Persons undergoing appreciable changes in marginal status due to job promotions or demotions and income adjustments undergo detectable biochemical changes, such as plasma testosterone levels. ⁴⁰ • Nations having a higher degree of income equality have higher levels of happiness and better health; Scandinavian countries rank highest. Accordingly, empirical research data of human subjective well-being indicate that generally, people view the value of economic incentives and rewards on a relative scale and as a measure of status and standing within a given domain of people . While an income level connotes a certain status in itself, income provides the means to acquire a broad range of material and nonmaterial positional assets, which may contribute additional elements of status. Wealth consumption necessary to acquire these assets will be influenced by the context of one’s decision-making environment. For example, one’s neighborhood may be the major contextual element selected for engaging a strategy to enhance one’s individual marginal status. Regardless of income level, the context of custom, time, place, and one’s social, family, and work spheres of influence constitute a frame of reference by which individuals evaluate their aspirations as well as ultimate happiness and satisfaction. Such elements of context are fundamental in the evaluation of one’s selfworth as well as that of others, both in consumer purchasing decisions and in modifying individual values and behavior to meet shifting cultural norms. Context serves as a prime motivator for determining one’s priorities in life and, combined with values and ethics, formulate and often modify human behavior, which is greatly influenced by opportunities to acquire additional material and nonmaterial positional assets. Frank notes that Adam Smith “introduced the important idea that local consumption standards influence the goods and services that people consider essential, i.e., ‘necessaries.’” Smith illustrates his point by describing how a linen shirt is “strictly speaking, not a necessary of life… . But in the present times [eighteenth century], through the greater part of Europe, a creditable day-laborer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.” ⁴¹ This also depicts the twenty-first century, as the consumer economy “is one of the greatest paradoxes of modern history: that an economic system designed to offer infinite choice to the individual has ended up homogenizing humanity.” ⁴²

However, being able to acquire and consume assets in the form of goods and services in order to maintain one’s perceived economic and social station in life is a fundamental human motivation. Thus, being subjected to long-term and excessive income inequality has detrimental psychological and material consequences for the poor and for society generally. Frank points out that economists appear reluctant to consider subjective well-being outcomes within their welfare analyses and economic models, as such expenditures are considered “not real costs but merely psychological ones.” Yet Adam Smith’s linen shirt story as well as common sense illustrates the social importance of nations promoting high standards of well-being and self-worth and the avoidance of shame for those members of society who statistically fall into the lower socio-economic rankings. Mathematically, some people will always occupy the ranks of the least fortunate, and their well-being and satisfaction should matter based on humanitarian grounds as well as being critical to a nation’s economy. Persons who continually perceive material and social inequities may consider themselves as suffering deliberate attacks to lower their marginal status and thus as dishonored, cheated, and abused. The person subjected to such a forcible reduction of self-esteem and sense of well-being is embarrassed and shamed by the denial of fairness and is less likely to become a contributing member of society. Nations that develop great financial inequalities among their people severely limit social cohesion, which will ultimately detract from financial and economic stability. Thus, protecting and nourishing the well-being of all members of society should be considered as a wise national investment in the future, not merely an optional charitable afterthought. Likewise, seeking a higher marginal status so as to avoid the embarrassment of suffering the relative deprivation associated with occupying a low social rank leads to competitive consumption within a community. Over time, such a consumption arms race results in the rising cost of what is deemed “adequate” (i.e., an escalating cost of local standards necessary for acquiring positioning assets of high status). An example of such an expenditure cascade is the increase in median new house size in America; in 1980 it was 1,600 square feet, and in 2001, it was 2,100 square feet. Furthermore, based on 2000 census data, Bjornulf Ostvik-White reports that a positive correlation exists between median housing prices and income inequality within public school districts. Thus, attending certain schools and living in high-priced neighborhoods both constitute desirable social positioning assets. ⁴³ Additionally, cars, clothes, and jewelry, based on their value as positional goods within a given community, will also contribute to one’s marginal status. This competitive consumption race encourages increasingly higher levels of personal expenditures, on a continuous and grander scale. Some may view this highly competitive consumption race to outpace others as simply a social disease of culturally induced envy and greed, but Frank contends that it is a fundamental human motivator to survive via seeking a superior marginal status. He considers this an example of natural selection : “relative

resource holdings influence real outcomes with sufficient frequency that the simplest evolutionary solution available was to craft a human nervous system that cared about relative position directly.” ⁴⁴ Darwinian Economics Darwinian economics is based on the conceptual parallelism of successful animal reproduction and long-term species survival and the success of human socio-economic systems, both being dependent on natural selection (i.e., favoring the “strongest concerns about relative resource holdings,” which contribute to a relative competitive advantage ). Accordingly, the human motivation of resource acquisition represents an inherent animal drive shaped by natural selection; some “people may be highly aversive to positions of low rank,” while others become overachievers. ⁴⁵ The probability of economic success is less for a person of low resource acquisition, corresponding to a lower marginal status and rank. People inherently value high rankings of recognition even when little, if any, tangible benefits are associated with that level of status. It is often just the sense of winning that counts. Thus, the competitive drive to achieve positive recognition and high status is a primary human motivator, usually satisfied by the acquisition of material and nonmaterial positioning assets as the pathway to supposed happiness and well-being. This fundamental human driving force, typically applied to socio-economic achievement of individuals within a social order, has broader applications to educational achievement, scientific inventiveness, athletic attainment, and artistic creativity. However, if those who have become professionally, financially, and emotionally fulfilled from their participation in the competitive processes of life were to seriously reflect upon the pathway to their attainment of success, they would probably admit that the role of luck and chance was of paramount importance. Most likely, certain events, circumstances, and individuals were critical in opportunities that appeared unexpectedly and were converted into major life-altering accomplishments. Alternatively, many individuals will seldom, if ever, become beneficiaries of such positive chance happenings and suffer from a lifetime of overwhelmingly negative, unlucky occurrences. Recall that Darwin’s concept of natural selection begins with, and is focused on, biological characteristics of the individual organism and its ability to survive and reproduce, so as to perpetuate its heritable traits. Importantly, while certain physical characteristics may assist the individual animal in the competition for mates, the same characteristics may, in the long run, become detrimental to the ultimate survival of the species. An often-used example is the greater probability of a male moose with a massive rack of horns siring a larger number of offspring by winning the combat for females, compared to less massive males. Thus he passes on genes possessing a higher probability of producing larger offspring with larger racks in later generations. However, as body weight and antler size increase over the generations, mobility to avoid natural predators such as wolves declines. Additionally, other negative health and survival aspects may also accumulate over generations, due to the largeness of body mass.

Note that the number of offspring per year, not necessarily longevity, is the primary factor in the individual moose’s effective propagation of specific animal characteristics. Thus, natural selection may provide individual specimens with certain biological traits and physical characteristics for becoming successful and dominant for a limited number of generations, but which may ultimately prove detrimental to the survival of the species. The balance between the opposing forces of individual benefits derived in the short term of a few generations from natural selection and those benefits accumulated long-term by the species confers a relative advantage or disadvantage to that species. If, to a large enough degree, individual benefits trump benefits to the species for many generations, the sustainability of the species may become doubtful. Applied to economics, the gap between individual and long-term group benefits, or the subsequent relative advantage , is referred to as Darwin’s wedge , the breadth of which may necessitate the establishment of social norms and societal regulations, depending on the severity of the financial and economic ramifications. The market dynamics of Darwinian economics and the wedge contrast shortterm competition among individuals and corporations, seeking self-serving immediate financial benefits versus long-term societal economic benefits for the common good. As noted in the previous chapter, US multinational corporations have achieved historic profits by virtue of new “relative competitive advantages” from a global economy, while the majority of Americans have endured decades of declining wages, benefits, general wellbeing, and political influence. Outcomes of “self-selection” from this trending political economics clearly benefit the bigger moose, which does not bode well for the propagation of the American social order. Importantly, Frank emphasizes that the utility of natural selection in economics carries significant implications for Adam Smith’s concept of the invisible hand . That is, will competitive economic forces, if left to their natural course and guided by the invisible hand or free market, ultimately produce prosperity for all or just for some, and to what level of inequality? As often represented, this concept is viewed as unregulated trickle-down economics, which ignores the ruthless corruption of the corporate and political worlds, both willing to modify their values and ethics in order to cash in on opportunities for great wealth. Lawrence Lessig appropriately notes: Capitalism’s biggest political enemies   .   .   . the executives in pin-striped suits extolling the virtues of competitive markets with every breath while attempting to extinguish them with every action. ⁴⁶ Darwin’s theory, as applied to competitive biological and economic processes being driven, in part, by the forces of natural selection, differs with Smith’s economic version in that the attributes and successes of the individual “animals” are not always aligned with either the best short-term or long-term interests of the species. Lessig continues:

The perpetual danger is that this competition will be “distorted by incumbents” because of an obvious fact not about markets but about humans: “those in power   .   .   . prefer to stay in power. They feel threatened by free markets”—even if it was free markets that gave them their power! ⁴⁷ According to Smith, if a market fails, it must be due to lack of competition. ⁴⁸ Smith proposed his invisible-hand theory in the eighteenth century, when the idea that truly competitive market forces could produce the greatest benefits for all would have been considered more reasonable than in the more competitive twenty-first century. However, it is not clear that Smith emphatically considered positive economic outcomes from highly competitive markets to be inevitable or always desirable, such as for restraints of free trade due to improper human behavior. Consider his words: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. ⁴⁹ Smith’s currently touted idealized view simply ignores the reality of human behavior in the marketplace of today’s complex, global economy; the longterm interests of the human species have become irrelevant to multinational corporate objectives of seeking quick, unprecedented levels of wealth. As the magnitude of potential global corporate profits soar, stockholders find it proportionally easer to succumb to human imperfections in the name of financial success. The history of the tobacco industry serves as an appropriate illustration. The World Health Organization estimates that during the twentieth century, a hundred million people died from smoking, and that in the twenty-first century, the figure will be up to one billion. The large profits of American tobacco companies during the twentieth century are well documented and well known, as is their large expenditures devoted to avoiding regulation and blocking the distribution of vital health information to the general public. While having established in their own research laboratories the debilitating and fatal consequences of smoking, the tobacco industry continues its unethically glamorized and misleading promotion of tobacco products worldwide. According to the US Surgeon General’s office, the tobacco industry spends more than $1 million an hour marketing and promoting its products. This promotion is effective, as for every American who dies of a tobacco-related disease each year, two smokers age twenty-six and younger take up the addiction, and nearly 90 percent of new smokers try their first cigarette before age eighteen. State tobacco tax revenues and legal settlement funds in 2012 are expected to be about $26 billion, but only 2 percent will be spent on smoking prevention and cessation efforts. ⁵⁰ Foreign marketing has been spectacularly successful for the tobacco companies, as 41 percent of men in poor and middle-income countries smoke. India and China have the largest number of new smokers, while the number of those quitting in these countries plus those in Egypt, Bangladesh, and Russia is as low as found fifty

years ago in the United States. Currently, tobacco use is attributable to 4 percent of deaths in poor countries, compared to 18 percent in the rich nations with a longer history of smoking. The lure of revenues and profits for both the tobacco companies and governments of poor nations is illustrated by a survey’s findings that these governments collected on average $9,100 in tobacco taxes for every dollar spent on anti-smoking promotions. It was also noted that in some countries, the tobacco companies are owned by the government. ⁵¹ Depending on one’s view of the appropriate scope or variables pertaining to the discipline of economics, Adam Smith’s now invisible hand mechanism, as related to the tobacco industry’s global outcomes, may or may not be deemed a success. While corporate profits, including the healthcare industry and government revenues, have benefited from the elective use of tobacco products, the long-term interests of the human species have and will continue to suffer disastrous consequences. However, if the behavioral science discipline of economics were to consider morality and human behavior and well-being in its modeling studies, it could have contributed to advancing the best interests and benefits of humankind. The history of the tobacco industry is an illustration of Adam Smith’s invisible hand being, when convenient, “more than invisible, it has been absent” and when necessary, “an iron fist wrapped in an invisible glove.” ⁵² Essentially, Smith’s principles have been misapplied in the modern times of mature market forces. His principle of the invisible hand is analogous to the ideal gas laws utilized in the physical sciences. They only apply over a limited range of variables and under some set of fixed conditions. Consequently, Smith’s economic concepts may, in some cases, appear valid when applied within a particular set of idealized socio-economic conditions. However, the actual dynamics of competition for socio-economic rewards has historically involved exceedingly high levels of complexity, human imperfections, and nonideal system behavior. Particularly, Darwinian economics recognizes that the intrinsically animal nature of human competitive behavior, when seeking positioning resources, is primarily based on individual self-interest and success and, at best, only secondary concerns and benefits of the community and later generations. Thus, the invisible hand’s economic premise is but a special, idealized condition of the real competitive world, which ignores the necessity for government regulation to deal with the inevitable human motivator of self-interest and with human intellectual, moral, and behavioral imperfections. This human dynamic reaches a high point during times of maximum economic growth when monopolistic markets, utilizing vast wealth, are able to block or circumvent financial, consumer, and environmental regulations to the detriment of the general well-being of the population. Frank provides an appropriate summary statement: When the ability to achieve important goals depends on relative consumption   .   .   . all bets regarding the efficacy of Adam Smith’s invisible hand are off   .   .   .   . Unbridled market forces often fail to channel the behavior of self-interested individuals for the common good   .   .   .   . On the

contrary, as the pioneering naturalist Charles Darwin saw clearly, individual incentives often lead to wasteful arms races. ⁵³ He also notes that the “legitimacy of a restriction must be decided by weighing its cost to those being restricted against the harm others would suffer if the behavior weren’t restricted.” But, adds, “Most moral questions involve actions that cause harm to others.” ⁵⁴ In the course of human history, the self-interest of corporate profits, income inequity, conspicuous consumption, and the guiding ethic of happiness and well-being of a few has, at times, prevailed, while ignoring the cost of debilitating harm to society. This “implausible ideology in self-interest is thus a natural course,” that is, natural selection of Darwinian economics “will favor individuals with the strongest concerns about relative resource holdings” and provides a relative competitive advantage. Niall Ferguson, in The West and the Rest , adroitly pinpoints the crucial element for the success of technological advancement on “a consumer society that actually wanted more,” but more is never enough. The Industrial Revolution would have been pointless if it had consisted only of a massive increase in the quantity of cloth, iron, and mechanical power that could be produced in a year. Equally important was the rapid development and spread of a consumer society that actually wanted more of these things. If technological innovation spurred the supply side, the demand side of the Industrial Revolution was driven by the seemingly insatiable appetite human beings have for clothes. ⁵⁵ The Influence of Spiritual Expectations on Economic Advancement Darwin’s theory of natural selection is applicable to the ultimate survivability of a social order’s economic system by virtue of the driving force and mechanisms of the competitive acquisition of material and nonmaterial positioning assets, capable of providing a relatively compelling, short-term competitive advantage but which may not lead to an ultimate long-term competitive advantage. Accordingly, it is instructive to consider the effect of culturally and religiously imposed values, expectations, and imperatives on competitiveness in seeking a resource advantage . More specifically, how do community, culture, and spiritual teachings interrelate and contribute to positive and negative aspects of individual and societal behavior and economic accomplishments? First, Darwinian economics contends that the basic human drive to establish one’s socio-economic successes and marginal status among peers is, like animalistic survival, primarily biological (i.e., in the DNA), but it is greatly affected by family, peers, and other environmental and societal influences. Thus, an individual’s inspiration to succeed in life begins as a biological drive that can be strengthened, remain uncultivated, or be suppressed by one’s overall environment. Second, it follows that identifying cultural influences that have affected past eras of substantial economic prosperity might reveal universal variables that

enhance socio-economic advancement. As such an example, Max Weber contends that the Protestant work ethic was a major influence on the Industrial Revolution being a European-centered, rather than an Asiancentered, phenomenon. Many authors have pursued the question of why the Industrial Revolution initially evolved from Western Europe, England, and the Netherlands as opposed to China, which during the sixteenth and seventeenth century was more technically and culturally advanced. A plausible response is the unique cultural traits within the European population, which appears to have aggressively optimized inventiveness, opportunity, and economic effectiveness. Such idealized values and behavioral attributes are associated with the Protestant Reformation of the sixteenth century, as noted by Weber. ⁵⁶ His insights into the work ethic and the spiritual and cultural foundation of Puritan Protestantism constitute radically different sociological dynamics compared to the civilizations dominated by Eastern religious thought and cultures at that time. The Eastern religions were motivated by, and focused on, the life hereafter , while the center of attention of Puritan Protestantism was on the here and now of a worldly religion. Weber offers the view of Protestantism as a culture with an intense work ethic, whereby self-fulfillment of one’s earthly destiny is an absolute religious imperative and is defined in terms of dedication and accomplishment in a profitable economic role and in a manner that is pleasing to God. It is noteworthy that religious philosophy and duty are linked to a work ethic and economic success as a requirement in order to avoiding eternal damnation. That is, God expects the individual to be associated with a society’s economic profitability and also good works that benefit others. In addition, one’s behavior must avoid worldly pleasures, frivolous self-indulgences, and displays of self-aggrandizement. Thus, regardless of one’s social or economic status, working diligently at some honorable and profitable job is a religious, divine expectation, not simply an optional socio-economic opportunity of self-interest in becoming financially successful. Michael Lessnoff argues that the Protestant ethic and the spirit of capitalism, while possessing subtle differences, share the same pathway but not the same ultimate objective. Protestantism provides “a powerful motivator of action not just for a few people but for large numbers… . Weber’s thesis is as much (or more) a thesis about human psychology as about the filiation of ideas.” ⁵⁶ The powerful psychological motivator is related to achieving salvation, which depends on having God view one’s general behavior positively, meeting high work expectations, plus providing service to one’s neighbors. Thus, the individual’s objective is to serve the glory of God, avoid temptations, and achieve the goal of eternal salvation while contributing to a financially successful, comfortable life for all members of the community. Conversely, for the capitalist, the primary profit ethic is for one’s own edification and pleasures and not associated with the objective of salvation, compassion, or a benefit to society as a whole. Puritan cultural traits include personal discipline and thriftiness, community as the first priority, an intense work ethic approaching religious zeal, strict

adherence to one’s religious ideology, and resource conservation. This philosophy, combined with a creative, entrepreneurial spirit, provides crucial economic conditions and socio-political features capable of creating resilient communal cohesion and cooperation during periods of economic prosperity and recession. Thus, it is possible to minimize individual and group conflicts by virtue of altruistic attitudes that inspire a responsibility and discipline for communal interests. These cultural characteristics represent an environment most favorable to long-term economic growth and a high probability of achieving social cohesion, social justice, innovation, and societal advancement and longevity. Summarizing this philosophy in the context of Darwinian economics highlights the commonality of their characteristics and desired outcomes. In order to achieve eternal salvation, the religious doctrine requires individuals to exhibit unusually strong “concerns about relative resource holdings,” which requires a strong commitment to learning, inventiveness, creativity, thrift, and scientific, technological, and economic knowledge. Thus, a higher probability of desirable outcomes for economic efficiency, productivity, social behavior, and individual self-discipline would be expected. However, at the same time, eternal salvation also mandates a societal-oriented individualism of contributing good works for the direct benefit and common good of other members of society (i.e., constructive elements for the long-term viability of the social order). These characteristics of an individual seeking to achieve a highly respected status in society are consistent with a high probability of achieving long-term success. Interestingly, in this cultural environment, individual success is not at the expensive of degrading other members of society. It is noteworthy that Weber predicted the spirit of capitalism would inevitably destroy the Protestant work ethic, as materialism would eventually undermine religious and cultural teachings, values, and dedication to learning and self-discipline. This is an apt depiction of America’s socio-culture transition from the colonial era to the twenty-first century. Few individuals in modern America would subscribe to the seventeenth-century Puritan Protestant values, ethics, and religious ideology. Previous great Western nation-states underwent the same transition, driven by shifting values, ethics, and self-discipline. A review of the latter stages of ancient Greece and Rome and imperial Spain would reveal the absence of the same cultural characteristics and positive attributes represented by Weber’s depiction of Protestantism as a major catalyst of the Industrial Revolution during the sixteenth and seventeenth century, which have been displaced within twenty-first-century Western civilization. Chapter VII Post-1980s New Republicanism: The Culture o f the Old South Collides with the Rights and Freedom Revolution

Let me now   .   .   . warn you in the most solemn manner against the baneful effects of the spirit of party   .   .   .   . It serves always to distract the public councils and enfeeble the public administration. It agitates the community with ill founded jealousies and false alarms, kindles the animosity of one part against another. ¹ George Washington Over the last half century, the gradual emergence of a unique, southernbased conservative Republicanism has dramatically transformed southern politics, and in 1994, Republican delegates attained a majority in the South’s delegation in both the US House of Representatives and the Senate. In contrast, in 1950, the South had no Republican senators and only 2 of 105 Republican House members. ¹ The scenario leading to this remarkable 1994 achievement provides valuable insights into the cultural sustainability and solidarity of the Old South as well as the origins of America’s last three decades of increasing national political acrimony, dysfunctional governance, and socio-economic deterioration. A new, extremely conservative national Republicanism has evolved since the 1980s, based on an extreme view of individual rights and freedoms and on narrow, self-serving ideologies. This political philosophy has projected a polarizing and paralyzing party mentality against altruism, science, human rights, and organized labor. This chapter deals with the evolution of this new national Republican movement, fueled by the nation’s continuing human rights revolution, ignited by the 1964 Civil Rights Act. The next chapter will discuss the political ramifications of this new post-1980s Republicanism on Washington politics, Wall Street’s financial collapse, and economic failures leading to the Great Recession. But first, it is instructive to identify the roots of this new political movement, most importantly to appreciate the evolution of its contrasting values, political mind-set, and political tactics from previous versions of Republicanism and from American history in general. Currently, party leaders differ dramatically from former highly valued, principled Republican leaders such as Everett Dirksen, Kenneth Keating, Bob Michel, Jacob Javits, Howard Baker, Hugh Scott, Gerald Ford, and George H. W. Bush. Accepting differences in political philosophy within and external to their party, these former highly regarded Republican leaders exhibited compassion, civility, an adherence to the ideals of democracy, and a willingness to compromise in order to achieve the public good. These values are rarely found within the party today, most specifically in support of lower and middle class interests, and social and public services, particularly for the concept of a social safety net. Perhaps, the values transition associated with this era of new Republicanism is best juxtaposed with the personalities, leadership styles, accomplishments, and national priorities of former Republican Speakers of the House from the eras of Dirksen and Michel to those of Newt Gingrich and John Boehner and by their respective successes (or lack thereof) in achieving the people’s business as opposed to contributing to an embarrassing paralysis of the House of Representatives.

The source of these shifting party values and objectives, which has nurtured a new brand of post-1980s Republicanism, is found within the South’s unique, historic, and intense conservative social and economic philosophy, priorities, and practices. While civil rights legislation sparked an abrupt, massive migration of the southern population from the Democratic party to the Republican party beginning in the 1950s, by the turn of the century, the party had attracted a large national base of conservative supporters. A wider geographical constituency has contributed to a broader array of conservative single-issue and self-serving interests related to religious beliefs, social issues, business and individual taxation, and government regulation of business and financial institutions. Common themes have been first, the denial of full rights, freedoms, and upper mobility for people who differ from a narrow, conservative stereotype of arbitrary acceptability. Second, a primary objective has been to employ economic and political policies and strategies that significantly shift the distribution of national wealth toward the business sector and the wealthiest citizens. Consequently, a major socio-political conflict continues, as extreme conservative values collide with progressive values that represent fundamental human rights and the democratic principles of social justice and the public good. The trail of this political transition originates with the conflict over basic human values found within the southern culture of the Civil War era. The Republican movement illustrates that “the past is never dead, it’s not even past” ² and that “whatever phase of the southern political process one seeks to understand, sooner or later the trail of inquiry leads to the Negro.” ³ The South’s Great White Switch: Culture Solidarity and Civil Rights Accordingly, the “trail of inquiry” into the great white political party switch of southern states begins with Lincoln Republicanism of the post-Civil War era. At that time, Republicans accepted the reality that a unified southern culture and Democratic party would remain intact and exceedingly hostile toward the North and the party of Lincoln for a very long time. However, from a political perspective, it was also apparent that the overwhelming Democratic voter influence of the South represented only one-third of the nation’s electoral base and thus was not necessarily a threat to the party’s national dominance. Thus, from 1860 to 1930, the Republican party was able to control the Senate for 86 percent of congressional terms and the House for almost two-thirds of its terms. ⁴ Accordingly, during the first half of the twentieth century, Republicans won only 80 of 2,565 congressional elections in the south. ⁵ However, in the aftermath of the Great Depression, the Republican party’s two-thirds northern strategic advantage gradually shrunk as northern Democratic support strengthened; combined with an overpowering majority in the South, Democrats nationally were able to gain control of Washington politics. During the early 1950s, southern Democrats won 94 percent of safe-seat congressional races (that is no viable opponent), with the number reaching 99 percent in the Deep South with 60 percent or better majorities.

Only a third of southern Republicans won safe seats during all of the 1950s. ⁶ Given this continuous Democratic safe-seat record, southern career politicians elected to the House of Representatives and Senate ascended via seniority to congressional leadership positions in Washington. They actively pursued the same southern policies: “protecting white supremacy, minimizing the influence of organized labor, keeping taxes as low as possible, and delivering services and benefits paid for mainly by affluent northerners… the interests, values, and prejudices of the most influential white southerners.” ⁷ Notably, these 1950s southern Democratic objectives mirror Republican party objectives of the twenty-first century. Additionally, the pre-1950s southern strategy of political solidarity embraced by Democrats, as noted in 1949 by V. O. Key Jr., is equally applicable to the current Republican national strategy. Unity on the national scene was essential in order that the largest possible bloc could be mobilized to resist any national move toward interference with southern authority to deal with the race question as was desired locally. ⁸ Returning to the 1950s, the existence of a strong national Democratic party voter base enabled the party to pursue a generalized rights and freedoms revolution under presidents Roosevelt, Truman, Kennedy, and Johnson, creating historic legislation. This included the New Deal, Fair Deal, Great Society, and Civil Rights and Voting Rights acts. Predictably, the national Democratic party’s progressive agenda increasingly faced a backlash from the more conservative South, which affected presidential elections immediately, and in the long term, southern liberal Democratic members of Congress were replaced with conservative Republicans. Three-fourths of southern white voters supported President Roosevelt in 1944, but after Truman proposed civil rights legislation, he received only 50 percent of southern votes in 1948. Thus, following Roosevelt’s lead, Truman cast a small stone into the pond of southern tranquility, which ultimately produced a tsunami of hostility that was to revolutionize southern politics over the next half century and, by the late 1980s, gave rise to an ultraconservative brand of Republicanism. The 1964 Civil Rights and the 1965 Voting Rights acts ignited an explosive response and were viewed in the South as unforgivable interventions into local race relations by federal authorities, disrupting established cultural values and socio-economic norms. American society’s general evolution had collided with a regional, long-established, and cherished culture. From the perspective of national politics, a coalition of northern Democrats and northern Republicans prevented southern Democrats from utilizing their veto on racial legislation, thus establishing as law the will of the national majority. During the next few decades, the escalating battlefield sectionalism of North versus South grew as intently emotional as in the Civil War era, emanating from the same disparate racial concentrations and economic ramifications

for most southerners. Additionally, the moral issues regarding civil rights and social justice had been heightened, as the southern culture came into increasing conflict with a more progressive global Western society during the second half of the twentieth century. With time, a broader scope of economic, social, and political issues, tangentially related to historic racial issues, emerged; these issues represented political opportunities for southern Republicans and were quickly incorporated into their agenda, as Democrats remained sharply divided between the culture of the Old South and a newly evolving, more progressive national agenda. Meanwhile, the long-term effect of the more liberal Democratic party agenda to improve the nation’s human rights policies, most importantly the plight of blacks, was beginning to have a deleterious impact on the party’s future. President Johnson, upon signing the 1964 Civil Rights Act, prophesied insightfully that the legislation would result in the South leaving the Democratic party for many generations. That he recognized the impact of his actions but proceeded to sign the legislation anyway speaks volumes for his character; he did what he considered right and just rather than following political opportunism. This, and other rights revolution legislation, gradually broadened and sharpened the scope of an ideological divide between the parties, which ultimately led to an electoral process whereby presidential elections are now determined by a small number of swing states. Ironically, up to the early 1960s, the Democratic party in the South was considered the defender of white supremacy, but by the latter part of the 1960s, a role reversal took place. The southern Republican party highjacked the issue while adopting a more aggressive and broader conservative agenda, which included economic development; this agenda substantively rejuvenated the party, particularly in the evolving, more highly populated urban areas. Southern Democrats were left in a highly vulnerable political position, being viewed as too liberal for a conservative white population and as abandoning the sacred philosophy of state’s rights (i.e., the ability to maintain white supremacy). In order to survive, southern Democratic congressional legislators sought safe haven by projecting contradictory political positions when on the home front and when in Washington. Thus, during the 1960s and 1970s, 60 percent of incumbent southern Democrats running as safe-seat conservatives were able to beat conservative Republicans by adopting a local strategy of openly rejecting the national’s party’s liberal agenda. ⁹ In this manner, they were able to retain sufficient but dwindling voter support for the short term and to defeat Republican challengers. However, Republican support continued to increase within the traditional southern Democratic voting bloc during the Kennedy and Johnson administrations, which forced many longtime southern Democratic legislators to either switch party affiliation or retire, with the latter being the preferred choice. After President Johnson signed the 1964 Civil Rights Act, Republican presidential candidates immediately began benefiting from the South’s Great White Switch; Barry Goldwater was able to defeat Johnson among white southern voters. However, the switch to realign the South’s

congressional delegation required an extended period of time, as southern Democrats temporarily thwarted the movement by modifying their political philosophies and by finding new strategies and tactics to win elections. The southern Republicans’ impact on presidential politics increased during the Eisenhower election but became more substantive during the era of Ronald Reagan. In 1952, about 80 percent of white southerners identified themselves as Democrats, and only one in eleven reported being Republican. ¹⁰ With Reagan’s 1984 re-election, southern white voters were about equally distributed between Democratic, 44 percent, and Republican, 42 percent, and this trend was evident in every southern state and included younger voters. ¹¹ The multigenerational nature of this transition of southern party affiliation since the mid-1960s was based on the rejection of the emerging ideological issues emanating from the national Democratic party’s expansion of human rights and freedoms. Reagan’s platform made an effort to make longtime southern Democrats comfortable in switching their allegiance to the Republican party; he was enormously successful, not only for his election campaign but also for the future success of an emerging new Republicanism. Reagan, noting his own switch of party affiliation, commented, “Now I know what it’s like to pull the Republican lever for the first time because I used to be a Democrat myself.” Clearly, he was more ideologically in tune with the traditional southern culture and its new political movement than his opponent, as reflected by his election platform that “disavowed busing and abortion, ignored the Equal Rights Amendment, demanded prayer be allowed in the schools, and advocated family values.” ¹² The three sequential 1980-1988 Republican presidential victories of Reagan and Bush established a southern Republican party record. Exit polling for the 1988 election in the eleven southern states indicated that 45 percent of white voters identified themselves as Republican, compared to 34 percent in 1982, while only 34 percent self-identified as Democrats. However, for these three elections, Reagan and Bush captured an average 84 percent of conservative white southern votes and 59 percent of the moderate white votes, for a composite of 80 percent of all southern white votes. ¹³ Hence, during the 1980s, Reagan’s leadership initiated a major political transformation of the region’s white electorate and a long-term realignment of southern politics, which ultimately produced its major Republican congressional victories of the 1990s. Post-1950s Reorientation of Southern Politics Following the Voting Rights Act of 1965 and the increase in the number of blacks eligible to vote, moderate Democrats seized the opportunity to rely on new majorities of biracial coalitions to successfully ward off Republicans and old-time conservative Democrats. Since 90 to 95 percent of blacks voted Democratic, it wasn’t necessary for Democratic candidates to win a majority of white votes. ¹⁴ Political moderation became defined as the necessity for white Democratic candidates to effectively blend the desires of both black and white constituents into a winning election platform while also placating the national party. However, this strategy was ultimately doomed to failure.

Between 1982 and 1991, southern Republicans won only one-third of House elections, as some Democratic politicians continued to shift their political views and redefine themselves according to the demographics of their districts, while others conformed to the more liberal national Democratic party agenda. ¹⁵ Not surprisingly, 45 percent of all Democratic incumbents voted as moderates during the 1980s. Consequently, conservative safe-seat Democratic incumbents were re-elected in 40 percent of their races from 1961-1981 but only at a 15 percent rate from 1982 to 1991. ¹⁶ Predictably, as southern Democrats increasingly became more liberal and more closely associated with the national party’s agenda, southern Republican candidates became more attractive to voters. Nevertheless, by 1990, the southern Republican party’s aggressive efforts to rebound from its 1952 dismal voter profile of 15 percent of white voters had essentially stalled at occupying thirty-nine House seats compared to seventy-seven Democratic seats. ¹⁷ The Democrats had a significant advantage by virtue of the “incumbency advantage,” whereby for over two decades they had won 97 percent of their incumbency elections, which accounted for 67 percent of the total southern House elections. ¹⁸ Importantly, during the 1980s, Democrats still benefited from biracial alliances in some districts, as biracial coalitions provided strong competition for Republicans (except in districts with 60 percent or higher percentages of white voters). To address this Republican party stalemate, a political redistricting strategy was designed to counteract the Democratic incumbency advantage and to dilute minority population advantages by selectively redrawing congressional boundaries according to race. The goals were first, to neutralize the advantages of existing majority-minority districts, and second, to offer attractive Republican candidates to those voters who found themselves in redrawn districts, absent their former incumbent officeholder for whom they had voted for many years. In essence, the tactic was to gain more Republican congressional House seats by assigning large numbers of black voters to a minimum number of election districts and by maximizing the number of election districts with high percentages of white voters, thereby minimizing the biracial Democratic advantage. Subsequently, during the Bush administration and prior to the 1992 elections, the Department of Justice (DOJ) enforced the majority-minority maximization policies in southern states, officially created race-based redistricting. ¹⁹ The DOJ directive required new boundaries for southern voting districts that would concentrate the black vote and thereby increase the number of majority black districts, which inherently placed white Democrat candidates in less favorable elective situations, thus enhancing elective opportunities for both blacks and Republicans. ²⁰

The strategy was very effective, as illustrated by changes in southern district populations from 1992 to 1994. The number of districts with black populations in the range of 20 percent to 40 percent of the total, representing strong biracial voting districts, decreased from forty-seven to twenty-four. But, the number of districts that increased its black population to over 40 percent increased from six to eighteen, and the number of black districts with less than 10 percent increased from thirty-two to fifty-one. ²¹ Therefore, by rearranging voter district boundaries based on racial demographics so as to minimize the statewide effect of the black vote, Republicans were able to win more congressional House seats and establish an ongoing strategic advantage over Democrats. The outcome was predictable: southern House elections produced only a few additional black Democratic legislators, and most races went to Republican candidates, representing districts with higher percentages of whites. ²² Overall, majority-minority districts produced whiter, more conservative voter blocs within a state, referred to as “bleached” districts. ²³ The stage was now set to implement the final phase of the South’s “Great White Switch.” During the 1990s, and for the first time, southern Republican incumbents won a larger percentage (86 percent) of safe seats than Democrats (59 percent). ²⁴ Additionally, there were more majority Democratic black districts (i.e., safe, liberal black districts), and fewer white Democratic districts with less than 50 percent black voters, which increased the probability of Republican victories in low black populated districts. This strategy was generally successful, and Republican victories in low black populated districts increased from less than 40 percent of all districts in the 1980s to 46 percent in the 1990s. ²⁴ Another important factor affecting the South’s political power during the latter part of the twentieth century was a successful economic development effort, which contributed to the redistribution of expanding state populations and created four times the number of urban districts as rural districts. Thus, the reapportionment and redistricting during the 1990s permitted Republicans to control 80 percent of congressional seats in very low black population districts, which constituted almost half of all southern districts. The southern Republican party was now postured to become an integral, significant part in reversing the political trend from 1932 through 1992, when national Republicans had controlled only five Senate seats and only two of thirty-two seats in the House. ²⁵ Foundations of New Post-1980s Republicanism Significant to the new Republican movement, in 1979, Newt Gingrich was elected by the state of Georgia to the House of Representatives; he became minority whip in 1989 and Speaker after the 1994 election. His supporters and leadership represented a more polarizing and conservative brand of politics, closer to that of Barry Goldwater than the more moderate substance of Ronald Reagan. Gingrich’s governing style embodied a ruthless intent to impose on Washington politics, at any cost, his singular, noncompromising, and narrow set of moral values, economic priorities, and political principles.

During the administration of George H. W. Bush, Gingrich and southern congressional leaders achieved major victories by deposing the old school Republican House and Senate leadership. The new southern leadership projected a different brand of Republicanism that would come to dominate Washington politics by the turn of the century and included such southern legislators as Mississippi’s Trent Lott, North Carolina’s Jesse Helms, Texas’s Phil Gramm, Tennessee’s Fred Thompson, and Alabama’s Richard Shelby. A new, southern-based conservative Republican philosophy, employing innovative political strategies and harsh tactics, began forging an extremely conservative agenda and a noncompromising style of governing. In one of their more important and successful strategic moves, national Republicans were able to enhance and expand their basic conservative appeal and add to their voter base by incorporating new segments of conservative supporters from religious groups, the business sector, and single-purpose special interest organizations, who were passionately focused on normally nonpolitical conservative issues. Such groups found commonality of mission within one or more elements of the South’s 1950s socio-political culture of “protecting white supremacy, minimizing the influence of organized labor, keeping taxes as low as possible, and delivering services and benefits paid for mainly by [the] affluent.” Additionally, it was consistent with the 1980s Reagan agenda, which “disavowed busing and abortion, ignored the Equal Rights Amendment, demanded prayer be allowed in the schools, and advocated family values.” ²⁶ These agendas represented the past, not a progressive future for America. The breadth of this highly personal, emotional, and self-oriented agenda of core economic, financial, spiritual, and social issues for an overwhelmingly white and deeply conservative segment of American society has evolved to become a powerful, effective national political force in the twenty-firstcentury. This backlash movement counteracting the rights revolution has been highly successful, representing a large collection of intensely motivated voters dedicated to upholding their conservative beliefs, related to Christianity, guns, abortion, gay rights and marriage, immigration, taxes, and state’s rights. Values representative of the Republican party of Reagan, not the party of Lincoln. Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed. ²⁷ Abraham Lincoln The new Republican ideology and agenda made history in the 1994 election, when northern and southern Republican candidates combined to achieve majorities in both the House of Representatives and the Senate for the first time in 122 years. ²⁸ Significantly, exit polls from 1980 through 2000 demonstrate the importance of the racial component of the Republican southern surge and the conservative backlash to the advancement of the rights and freedoms revolution during the past half century.

It is noteworthy that theoretically, given the Republican party’s scant black vote, it needed to capture about 60 percent of the white vote (i.e., the Republican white target), in order to gain a majority of the total southern vote. Only when the white vote component increased in 1994 by 11 percent over the previous election, reaching 64 percent, did the party achieve this milestone. As the surge continued to swell into the 2000 election, southern voters indicated a preference for Republican candidates to Democrats, 70 percent to 14 percent, the largest gap ever recorded in the South. ²⁹ Thus, America has clearly undergone a monumental socio-political transition during the last half century as a result of long-established cultural attitudes and values, which are in deep conflict with progressive social change. Accordingly, it is instructive to identify, compare, and contrast this cultural evolution within the context of the principles and ideals of democracy. More specifically, during the last half century, to what degree have the principles of common cause and social justice actually been guiding America’s core economic, social, financial, and political institutions, as well as the everyday behavior of its people? Newt Gingrich: Architect and Catalyst for a New Republican Culture Gingrich appeared on the political scene in 1979 and inspired a national conservative movement, contributing substantially to a new American political culture by providing the catalyst for Republican successes from the 1990s and beyond. When Gingrich entered the House of Representatives, he had already formulated tactics to insure his personal success and to end the twenty-four-year Democratic party control of the House of Representatives. He was primed on arrival to lead the charge. In 1979, as a congressional freshman, Gingrich shared his plan for Republicans to gain control of the House with a group of other freshmen from both parties at a National Conservative Political Action Committee dinner meeting. Mann and Orstein, organizers of the event, report his message: The core strategy was to destroy the institution in order to save it, to so intensify public hatred of Congress that the voters would buy into the notion of the need for sweeping change and throw the majority bums out. His method? To unite the Republicans in refusing to cooperate with Democrats in committee and on the floor, while publicly attacking them as a permanent majority presiding over and benefiting from a thoroughly corrupt institution. ³⁰

Both Democrats and Republicans attending the meeting were reported as “deeply unsettled” by the strategy, ³¹ particularly the disdain expressed for majority-minority congressional partnerships, which in the past had promoted successful political compromises, particularly in the Senate. However, Gingrich accumulated a few allies, including Dick Cheney, some of whom assumed the moniker of “the bomb throwers.” ³² After Ronald Reagan came into office, Gingrich acquired new followers and formed the Conservative Opportunity Society, which was dedicated to “create an alternative power structure” within the House. ³³ In 1984, Gingrich described the media strategy that complemented his political strategy of open confrontation: “The number one fact about the news media is they love fights… . You have to give them confrontations. When you give them confrontations, you get attention; when you get attention, you can educate.” The strategy worked as planned, as wellpublicized battles with Speakers Tip O’Neil and Jim Wright and with President Clinton brought notoriety to Gingrich and his views. ³⁴ By 1992, Gingrich had made great inroads, convincing Republicans to become more unified and hostile in opposition to any proposal from the opposition. This was a significant step toward his goal of establishing the House as a parliamentary minority , which was his mechanism for ultimately taking majority control. Accordingly, he promoted this message and his objectives to potential House candidates prior to the 1994 midterm election, and with the resulting net gain of fifty-two seats and the first House majority in forty years, Gingrich was positioned to achieve his personal goal of becoming Speaker. As House leader, Gingrich proceeded to implement the Westminster parliamentary minority model for the House of Representatives that was designed to function as a parallel government as found in England. This required an abrupt change in tactics, by which party members would become totally opposed to anything the majority proposes, regardless of the individual’s (or party’s) past positions; that is, they became ideologically “polarized, internally unified, vehemently oppositional, and politically strategic.” ³⁵ Clearly, this strategy has proven successful for the Republican party but not for the nation. However, Gingrich, as the creator of the politically successful revolutionary movement, was not to survive the abundance of negativity from his drastic change of the House culture, particularly his ruthlessness as Speaker. His parliamentary minority model and harsh authoritarian methods proved to be his undoing as the House leader, as bitterness and opposition of the House membership accumulated to a critical level. Additionally, serious ethics charges had been filed against him. To a historic degree, Gingrich had centralized power to his office and the Republican conference, utilizing administrative rules and techniques to minimize potential challenges to his leadership and control of the House’s work product prior to rank-and-file members becoming involved in the legislative process. He (1) assumed authority to appoint committee chairs, disregarding seniority, (2) required loyalty pledges from appointees, (3)

reserved an unprecedented number of the most coveted committee appointments for first year members, (4) controlled committee staffing and limited the powers of chairs by distributing responsibilities to junior committee members, (5) set committee agendas and monitored every committee’s scope of work, and (6) assigned leadership task forces to write key legislation in lieu of standing House committees. ³⁶ Mann and Orstein provide a summary evaluation: “Gingrich deserves a dubious kind of credit for many of the elements that have produced the current state of politics. He crystalized the approach of crafting a cohesive, parliamentary style minority party… . [His] original strategy to gain power by attacking his adversaries and delegitimizing the Congress left a lasting mark on American politics.” ³⁷ Additionally, during his House years, Gingrich established the tone, strategies, and tactics that have become the essence of American politics, the core of modern confrontational politics. The Gingrich strategy of the House becoming a “parallel government” has continued to today, intensified by the self-named “Young Guns” and by the Tea Party. “Today’s Republican party… is an insurgent outlier… ideologically extreme, contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence, and science, and dismissive of the legitimacy of its political opposition, all but declaring war on the government.” ³⁸ In 2011, leading up to the extension of the debt limit ceiling, conflict arose between Republican senior leadership and the party’s Young Guns, who represent the fruit of Gingrich’s legacy of polarizing, destructive politics. The Young Guns were recruited and assisted in their elections to the House by the direct efforts and funding of House members Eric Cantor, Kevin McCarthy, and Paul Ryan. ³⁹ Robert Reich points out that “today’s Tea Party is less an ideological movement than the latest incarnation of an angry white minority— predominantly southern and mainly rural… . It’s no mere coincidence that the states responsible for putting the most Tea Party representatives in the House are all former members of the Confederacy.” ⁴⁰ Correspondingly, the 2010 congressional Tea Party Caucus consisted of twelve members from Texas; seven from Florida; five each from Louisiana and Georgia; and three each from South Carolina, Tennessee, and the border state of Missouri. Nationally, 87 percent of Republicans are non-Hispanic whites, with an average age of almost fifty. ⁴¹ Significantly, over 80 percent of the votes cast in 2010 for winning Republican House members were cast by whites. Clearly, while attracting more than southern voters, the cult-like but divergent social and political characteristics of the Tea Party reflect the attitudes and values of the Old South. Reich cites a CNN poll that highlights extreme views of these “regressives,” which differ from the majority opinions of “what had been the Republican establishment.” Specifically, global warming isn’t a proven fact, evolution is wrong, the Department of Education should be abolished, and reducing the deficit is more important than unemployment. Reich continues:

Many of these people would like to return America to the 1920s—before Social Security, unemployment insurance, labor laws, the minimum wage, Medicare and Medicaid, the worker safety laws, the Environmental Protection Act, the Glass-Steagall Act, the Securities Exchange Act, and the Voting Rights Act. ⁴² Thus, the partisan polarizing surge and historically large values gap that has evolved since 1980s, as identified in the 2012 Pew Research Center survey, has been fueled by the Republican party shifting to a more conservative position, as represented by the Tea Party agenda. As a fitting swan song, Newt Gingrich returned in 2011 as a Republican presidential hopeful. During the candidate debates, he remained consistent with his longtime strategy of total repudiation of anything an opponent proposes and harshly criticized Obamacare as socialism, calling for its repeal. Ironically, Obamacare was invented by the conservative Heritage Foundation, promoted in the 1990s by Gingrich himself, implemented by Mitt Romney, the conservative governor of Massachusetts, and upheld as being constitutional as a result of the singular vote of the conservative Supreme Court Justice John Roberts. Obama accomplished an objective that had eluded attempts by presidents of both parties for over seventy-five years, but the current conservative Republican orthodoxy calls for repeal (and replacement with an unspecified new plan). Shifting Voter Values and Priorities The 1996 National Election Study and the 1996 Voter News Service exit poll provide insights into the thinking, motives, values, and priorities of southern Republicans at the turn of the century. Generally, the data indicate a high degree of self-oriented individualism, as exemplified by the general sense of “I provide for myself, and others should likewise provide for themselves and not rely on government handouts,” as contrasted with a more compassionate, altruistic viewpoint that anyone may come to need some form of temporary (or permanent) assistance. This thinking includes welfare being utilized to assist people’s temporary loss of income but not for a broader range of public assistance, which is considered as unfair to working, taxpayers and as providing an incentive to avoid becoming employed. ⁴³ Findings include the following: • Seventy-four percent of southern Republicans felt they paid “more than the right amount in taxes,” and only 40 percent supported increasing money for public education. • Two-thirds thought it was more appropriate to cut government services in lieu of increasing taxes, and equal support was expressed for allowing free markets to prosper on their own “without government interference.” • Twenty-six percent thought the federal government should be reduced in size, and 15 percent thought taxes should be reduced for the middle class. • Fourteen percent thought it should be a high priority for government to be responsible for maintaining a healthy economy.

• Fourteen percent thought it appropriate to improve education, health care, Medicare, and Social Security. • “Substantial majorities of the conservative white Republicans believed it was not the responsibility of the federal government to see that blacks are treated fairly in employment.” The data are consistent with the frequent comments of many Americans of less government regulation of corporations, financial institutions, and the environment; low business and personal taxes; minimal assistance to those in need; and fewer resources to educate the next generation. The profile of southern voters that emerges from exit poll data reveals that 87 percent of “all white southern voters” are Christians, of which 30 percent are “formally associated” with the religious right movement, compared to 18 percent of white voters nationwide. Additionally, 65 percent of southern “religious right whites” self-identify as “core Republicans,” while 17 percent self-identify as core Democrats. ⁴⁴ Interestingly, while the religious right movement seeks government prohibition of abortion as “always illegal” (30 percent) or “mostly illegal” (40 percent), they also support the contradictory view that government should not intervene in the private lives of individuals. Additionally, based on their personal religious beliefs, 50 percent of those polled saw no reason to tolerate the moral standards of other people that differed from their own, the rationale being based on the legitimacy of mixing religion and politics in arriving at such values and behavior toward others. ⁴⁵ Also, in more recent polling elsewhere, conservatives emphasize the necessity for individuals to take responsibility for themselves but oppose the federal mandate that all Americans be required to buy health insurance or pay a penalty (i.e., take responsibility for their own inevitable health care costs). Subsequent to the collection of these data and information from the 1996 study and the voter exit poll, the new politics of the twenty-first century continues to polarize the nation’s electorate and enhance extremism. By the second decade of the twenty-first century, the post-1980s southern brand of Republican conservatism had become the dominant national image of Republicanism. The 1996 National Election Study and the 1996 Voter News Service exit poll of southern Republican voters are useful in determining voter opinions, values, and priorities associated with the South’s rapid, extensive political transformation, but it was restricted only to the South and to the Republican party. Obviously, it would be valuable to have such data available for members of both parties nationally from the 1980s to the current time in order to validate the current perception of significant political polarization within the American population. The Political Partisan Divide Fortunately, the Pew Research Center for People & the Press provides such information in its June 2012 report entitled “Partisan Polarization Surges in Bush, Obama Years: Trends in American Values: 1987-2012.” ⁴⁶ This project represents the continuation of a national survey that was created in 1987 by

the Times Mirror Center for the People & the Press (since 1996, it has been conducted by the Pew Research Center). Since 1987, 35,578 interviews have been conducted, with the most recent interviews being held between April 4 and 15, 2012, involving 3,008 adults. Utilizing the Pew study, we can find differential levels of self-described attitudes, values, priorities, and behavior of both parties; the study tracks the socio-political polarization of the American population over this time period. Generally, most of the findings of the 2012 survey agreed (within + 5 percent) with responses of twenty-five years ago. The two exceptions were “views of government” and “social values.” The report emphasizes that the general agreement in all but these two areas “does not mean the nation has not undergone a fundamental transformation… . The defining change in American politics over the past quarter century is not in overall public beliefs, but how these beliefs are increasingly being sorted along partisan lines.” Core members of both parties are “more homogeneous and less cross-pressured, and hold more consistently liberal or conservative views across a wider spectrum of values.” The most abrupt changes in the survey since 1987 are the two segments of “the federal government’s role and performance” and “public views about race, homosexuality, gender, and family.” ⁴⁶ Since the 1980s, America’s partisan surges of polarization and increasing political divide have been propagated, in large measure, by racial and religious demographics; a self-centered, extreme conservative ideological drift; and the power of the nation’s most wealthy elite to successfully influence, dominate, and control the nation’s governance system. First, currently, 87 percent of Republicans are non-Hispanic whites, with an average age of almost fifty. Meanwhile, the Democratic party has become younger and more racially diverse, with 55 percent non-Hispanic whites, a decline from 64 percent in 2000. Second, 49 percent of non-Hispanic white evangelical Christians identify as Republicans, with all evangelical Christians representing 25 to 30 percent of the American population. Third, wealthy individuals and major corporations have used creative lobbying strategies, modern legal tactics, and effective marketing techniques to promote a broad-based conservative agenda, thus creating a large, divergent base of energized political supporters for the new Republican movement. ⁴⁷

For whatever reason, many Americans have dropped their major party identifications and have become self-described Independents, which is a broadly divided group that now outnumbers both major parties. Based on Gallup data, there are more Americans self-reporting as being politically Independent in 2012 (38 percent) than at any time in the last seventy-five years. Democrats are represented by 32 percent and Republicans comprise 24 percent. In 1991, each group represented about one-third of the nation’s population. Currently, as party membership has shrunk, the proportion of the general population identifying as conservative Republicans is 17 percent, with approximately 8 percent identifying as liberals and an equal portion being moderates, which have declined from 12 percent in 2001. ⁴⁷ In 2012, more so than at any point in the past twenty-five years, American cultural values, beliefs, and political philosophies have become more sharply polarized along partisan lines, as both parties have become smaller and more ideologically homogeneous. The dominant social issues of this era reflect the nation’s more conservative and polarized politics. Between 1987 and 2012, the value gap between parties, as measured by Pew, has almost doubled and is more extensive than gender, age, race, or class divisions. The gap is attributable to both parties, as Republicans “clearly take a more conservative position,” while Democratic values “have remained relatively constant.” ⁴⁸ The largest generational gap between younger (eighteen to twenty-nine) and older (sixty-five plus) Americans were core values related to modern social changes of homosexual rights to marry, single parenting, and racial integration. While the general public has increasingly become more supportive of interracial dating over the years, 95 percent of the younger group and 68 percent of the older group registered support in the most recent survey. While milder support exists for gay marriage generally, much greater support exists within the younger set. ⁴⁹ The report notes three important gender and generational value gaps. First, 62 percent of women believe that, on the average, one parent may be as successful in raising a child as two parents; only 39 percent of men agree. A second gender gap exists with respect to party affiliation, where 37 percent of women and 27 percent of men declare themselves as Democrats; 24 percent of women and 25 percent of men as Republicans; and 33 percent of women and 43 percent men report as Independents. Finally, a party age gap exists, where generally younger Americans are more “Democratically oriented,” and the older generation is more supportive of more conservative Republican candidates. ⁴⁹

Eighty percent of Americans agree with the statement: “I like political leaders who are willing to make compromises in order to get the job done,” which compares with the 1987 finding. Significantly, this breaks down to 68 percent of Republicans believing that the quality of compromise is “appealing” in political leaders, compared to 90 percent of Democrats. In recent years, not only has compromise been significantly (and sadly) absent in the politics of governance, but incumbent politicians, long recognized for their talent in finding compromise with the opposition and reaching consensus on important matters, have suffered defeat at the polls for possessing this attribute, most often in party primaries. ⁵⁰ One of the two major value differences between the parties is the “scope of the federal government”; 69 percent of Americans are of the opinion that “the federal government should run only things that cannot be run at the local level.” This average breaks down to 84 percent of Republicans compared to 56 percent of Democrats, with the gap between parties being twice the size found three years ago. ⁵¹ Value differences between parties regarding government “responsibilities in providing a social safety net and actively addressing inequality in the nation” have doubled during the last twenty-five years. Accordingly, support for government social safety net programs has declined from 69 percent in 2007 to 63 percent in 2009, and to 59 percent in 2012, as more Americans are increasingly of the opinion that people should take greater responsibility for themselves. Responses to the statement “It is the responsibility of the government to take care of people who can’t take care of themselves” found 40 percent of Republicans supportive, which is an 18 percentage-point decline since 2007. As an interesting reference point, during the second Reagan administration, this figure was 62 percent, and during the George W. Bush administration, about 50 percent. Conversely, 75 percent of Democrats agree with the statement, a position that has been relative constant for a quarter of a century. ⁵² Sixty-three percent of Republicans disagree that the “government should guarantee every citizen enough to eat and a place to sleep,” while 78 percent of Democrats agree with the statement and 65 percent thought “more support for the needy should be provided, even in the face of increased debt.” The largest single value gap in the 2012 survey, 51 percentage points, was for “government becoming too involved in health care,” where 88 percent of Republicans expressed “concern” compared to 37 percent of Democrats. However, twice as many moderate Democrats (46 percent) as liberal Democrats (23 percent) were concerned. ⁵³ For the last twenty-five years, a majority of Americans have “consistently held the view that the government has a responsibility to care for people who can’t take care of themselves.” Eighty-six percent agreed “that society should do what is necessary to ensure everyone has an equal opportunity to succeed.” However, when the question was reworded to focus on “preferential treatment” and “minorities” to read “every possible effort should be made, including the use of preferential treatment, to improve the

position of minorities,” only 33 percent of the public and 22 percent of whites were supportive. The percentage of white Democrats favoring such preferential treatment has increased from 31 percent in 2007 to 32 percent in 2009, and 44 percent in 2012. Combined with black support, this figure reached 52 percent of all Democrats, representing a first majority finding for this particular question from such a political survey. Generational differences were noted. Thirty percent of white Americans under the age of thirty supported “every possible effort,” compared to 21 percent of those over thirty. ⁵⁴ When presented with the statement “discrimination against blacks is rare today,” 61 percent of participants disagreed and 34 percent agreed, a finding that has been relatively constant for the last decade. Additionally, agreement with the “perception that blacks have not made progress in recent years” has increased modestly since 2009. In particular, in 2009, 26 percent of whites said there had been “little improvement for blacks,” as compared to 33 percent in 2012. ⁵⁴ Twenty years ago, when environmental questions were first included in the survey, there was a 13 percent separation between Democrats and Republicans on such issues, which is now a 39 percent differential, the largest value gap ever for this topic. For the first time, less than half of Republicans (47 percent) agreed with the statement “there needs to be stricter laws and regulations to protect the environment.” In 1992, the figure was 86 percent, which sequentially declined to 64 percent in 2009 and to the current 47 percent. In 2012, 93 percent of Democrats supported the statement. ⁵³ In 2007, during the latter stage of George W. Bush’s administration, equal percentages (57 percent) of Republicans and Democrats were of the opinion that “government regulation of business usually does more harm than good.” This finding was consistent with political surveys since 1987. However, in 2012, 76 percent of Republicans and 41 percent of Democrats agreed with the statement. But 63 percent of all respondents were also in agreement that “a free market economy needs government regulation in order to best serve the public interest”; only about half as many, 31 percent, disagreed. ⁵⁰ Twenty years ago, there was little difference among the views of Independents, Democrats, and Republicans regarding immigration policy, with about three-quarters of each group favoring greater restrictions. Over the years, there has been a modest overall reduction favoring greater restriction by both Democrats and Independents. In 2012, 58 percent of Democrats favored greater restrictions on immigration, compared to 84 percent of Republicans. Sixty-nine percent of all respondents agreed with the statement “we should restrict and control people coming to live in our country more than we do now,” with 28 percent disagreeing. ⁵⁴ The rationale for this great anxiety over immigration is reportedly based on a perceived threat to the nation’s customs and values. This applies to 60 percent of Republicans and 39 percent of Democrats; ten years ago, the numbers were reported as 54 percent and 50 percent, respectively.

However, the race and ethnicity basis varies among respondents, as shown by the responses from white Democratic liberals (14 percent) and moderates and conservatives (47 percent). ⁵⁴ Summary of Major Pew National Findings: Partisan Polarization Clearly, since 1987, a large segment of the American population has undergone a dramatic shift of social values and ethics and the nation’s politics has drifted toward more conservative, less altruistic, and more selforiented individualism. Extreme socio-political divisions have become evident as Americans (1) have become more uncompromising on important social and economic issues; (2) are politically divided between a mostly white, highly conservative party of greater wealth and a more liberal, multiracial party that is less representative of corporate and professional supporters; (3) are less supportive of federal government involvement in their lives; and (4) are less supportive of government guaranteeing people, especially minorities, adequate food and shelter, with more than half of Republicans agreeing that government shouldn’t take care of people unable to care for themselves. The Pew study identifies and measures the nation’s loss of cultural values and its current cultural extremes, which have paralyzed the governance system and crippled the economy. Most significantly, it illustrates the mockery that America has made of the fundamental ideals of democracy and the principles of common cause, which is society’s most valued motivator, and social justice for all, which is society’s most treasured goal. Contrast America’s current cultural mentality with that of World War II, when exemplary altruistic values, the spirit of common cause, and unselfishness successfully defended the country, liberated Europe, and inspired the Marshall Plan’s successful re-establishment of a stable and prosperous world. The 1996 election study and exit poll data and the 2012 Pew survey contribute mutually consistent findings toward a composite portrait of American values, priorities, and objectives. Most striking is that by the second decade of the twenty-first century, the Republican party appears to be winning the “what’s in it for me” competition for political supporters. Their direct and subtle messages of white supremacy, religious issues, financial benefits for corporations and the wealthy, and hot-button social issues regarding guns, gays, abortion, and immigration has been extremely popular in a highly materialistic, anti-intellectual, cynical, and irrational era. New Republicanism and America’s Human Rights Revolution Clearly, the rudimentary driving force responsible for the dramatic transformation of southern cultural characteristics and politics to the national scene during the last half century has been a counterattack to the nation’s increasing embrace of more progressive, basic democratic rights and freedoms. America’s turbulent human rights legislative pathway toward a more ethical and authentic representation of democracy is the result of the efforts of Democrats, liberal Independents, and moderate Republicans.

Historically, Lincoln’s Republican party was transformed into Reagan’s Republican party, the momentum of which ultimately carried the party to an even more extreme conservative position during the 1990s and into the new century. As previously noted, between 1987 and 2012, the value gap between the two parties, as measured by Pew, almost doubled, which is attributable to both parties, as Republicans “clearly take a more conservative position,” while Democratic values “have remained relatively constant.” Considering America’s half century of socio-cultural change within an increasingly polarized, politicized value gap, it is instructive to examine the objectives of the nation’s fifty-year progressive revolution in the context of the basic values, principles, and ideals of democracy. On the other hand, today’s Republicanism reflects conservative values that reflect long-held southern social, economic, and political principles and practices, which have proven to be incompatible with America’s human rights revolution. Arguably, one of the most important freedoms is equal access to quality jobs, enabling everyone to benefit from the national economy. This includes a safe working environment and equitable wages and benefits, including unemployment insurance, health care, and a pension plan. Since the Great Depression, and as a consequence of rapid industrial development and the nation’s prosperity, human rights issues have more prominently emerged as constituting a critical national agenda, with open access to desirable jobs being a key objective. Accordingly, from the 1930s to the early 1960s, the focus of organized labor was primarily dedicated to workers’ rights, wages, and benefits; the role and power of the unions; and the legal responsibilities of management in dealing with its labor force. However, while the rights movement supported equal employment opportunities and rights for all people, it forcefully pursued the specific inclusion of women, minorities, and immigrants, which became a highly divisive social issue. It should be noted that during this period, the basic bargain between labor and business to maintain a mutually beneficial relationship was generally respected. Politicians occupied a more subservient role to both labor and business, compared to the twenty-firstcentury corporate influence and domination of both politics and labor. The post-1960s era gave birth to a major social movement, inspired and catalyzed by the New Deal, the Fair Deal, civil rights and voter rights legislation, the Great Society, and school desegregation. A continuously intensifying rights revolution , initiated by “formerly stigmatized, marginalized, or disenfranchised” populations, swept the nation. ⁵⁵ These newly organized identity groups and their identity politics were centered on civil, women’s, religious, sexual, social, ethnic, and economic rights and associated responsibilities. Their collective impact, as a coordinated alliance for progressive and modern human rights, ultimately required the established power structure within business and politics to contend with their missions, agendas, purchasing power, and political influence. Over time, the rights revolution bred a broadening and intensifying authentication of additional human rights, which became legally integrated

into the fabric of society. Slowly, over the decades, the nation came to grips with its responsibility to extend legal protection to all members of society, in accordance with fundamental democratic principles. Subgroups of American society, which had suffered long-term physical, social, and economic illtreatment, were extended beyond race, ethnicity, gender, and sexual orientation to include such areas as reproductive rights of contraception and abortion; welfare rights; rights of non-Christian religious groups; and rights of the mentally ill and those with physical and other medical impairments. Unfortunately, counteridentity forces strongly resisted the expansion of the human rights agenda into additional socio-economic, personal, and political freedoms of everyday life, which exceeded the sphere of personal beliefs and comfort level of a large portion of Americans. Rather than adopting a conciliatory attitude of respect and attempting to reach a degree of accommodation with what was considered secondary citizens , a counterculture developed marked by rabid defiance of federal law. Conservative white Christians, all too often, aggressively and bitterly pursue regressive social policies, refusing to extend full rights, freedoms, and opportunities to disenfranchised groups. ⁵⁶ Such tactics utilized the familiar definition of allowable human rights and freedoms for the “underclass,” which is based on selected elements of rights that are acceptable to the upper class’s economic and social interests and worldly-and-beyond beliefs and aspirations. Thomas Edsall points out that by the late 1970s, the rights revolution “had ratcheted up millions of newly empowered and assertive contenders… in effect intensified competition for jobs, college admission, and promotions, as well as for such less tangible benefits as status, deference, and authority.” He notes that Lester Thurow captured the sense of the movement of former “powerless groups”: In the past, political and economic power was distributed in such a way that substantial economic losses could be imposed on parts of the population if the establishment decided that it was in the general interest. Economic losses were allocated to particular powerless groups rather than spread across the population. These groups are no longer willing to accept losses and are able to raise substantially the costs for those who wish to impose losses upon them   .   .   .   . They are no longer willing to accept losses without a political fight. ⁵⁶ The nation’s rights revolution continuously met, absorbed, and struggled with the opposition’s counter forces. As newly empowered segments of the rights movement acquired additional or expanded legal rights, thereby increasing social, political, and economic competition, well-established groups increased their efforts to maintain the status quo or, in some cases, to reverse decades of social progress. Thurow characterizes this ping-pong match as “a zero-sum game” for the nation… there are American winners and American losers.” Some incomes go up   .   .   . but others go down. Individuals do not sacrifice equality. Some gain; some lose. A program to raise the occupational position of women and minorities automatically lowers the occupational position of

white men. The resulting politics becomes a more explicitly and equal struggle for resources—and an increasingly bitter one. ⁵⁶ A society’s use of public, corporate, or nonprofit institutional resources “to raise the occupational position of women and minorities [that] automatically lowers the occupational position of white men” remains an unpopular view in America. General acceptance of such modifications of employment competition in the name of improving job opportunities for segments of the population who formerly suffered discrimination would require an exceedingly high degree of altruism, which is generally absent within a modern materialistic society. Embracing altruism necessitates gladly giving up something of value, as in time and money, to assist others for the common good and to promote social justice. Currently, individuals promoting the specifics and general direction of the new Republican agenda are not advocates of altruism or societal-oriented individualism, as is evident by the revival of Ayn Rand’s anti-altruism political philosophy among the Republican party. Significantly, social biologists consider altruism to be a fundamental aspect of social behavior, not just for humanity but, on a larger scale, for the totality of the animal world. Edward O. Wilson emphasizes that the “origin of the human condition” (or more broadly, the evolution of social life) is not restricted solely to the social behavior of humans but selectively applies to other animal species (e.g., ants): Members of a eusocial animal group, such as a colony of ants, belong to multiple generations. They divide labor in what outwardly at least appears to be an altruistic manner. Some take labor roles that shorten their life span or reduce the number of their personal offspring, or both. Their sacrifice allows others who fill reproductive roles to live longer and produce proportionally more offspring. ⁵⁷ The evolution of an animal species from a simple organism to a superorganism, which possesses a more complex social system, follows a mechanism whereby “eusociality, the condition of multiple generations organized into groups by means of an altruistic division of labor, was one of the major innovations in the history of life.” ⁵⁸ The very long view of history may come to see America’s last century as a catastrophic era of extreme cruelty, indignities, and lost opportunities for a purported Christian-centered democratic nation, which failed to rise to the challenges of its spiritual teachings and to implement fundamental ideals of democracy. This task would have required a national effort to respect human rights and freedoms and provide opportunities for education, employment, full citizenship, and dignity for all members of society. Academicians define the mission of teaching as taking students from one level of education to a higher level, regardless of ability, past opportunities, and experiences. Additionally, higher education is explicitly related to greater employment opportunities, financial success, a sense of well-being, and social mobility (i.e., access to the American dream). The America of 2013 might have become more economically prosperous, socially and politically stable, and more satisfying if, rather than working so

diligently to repress the “underclass,” the nation had adopted an uplifting spirit to create a better-educated and employable general population regardless of race or national origins. One could speculate that, in the long term, a wise financial investment of national wealth could now be supporting economic growth and generating adequate tax revenues with lower welfare and public assistance costs, an economic tide that raises all boats. However, civil rights legislation reopened old wounds, which have yet not fully healed, or perhaps the Civil War warped the American soul beyond full recovery and redemption. Paul Krugman depicts slavery as “American’s original sin.” ⁵⁹ One view of this “original sin” is offered by David Brion Davis: “By virtue of the American Revolution, Southern slaveholders occupied an extraordinary position… only in America was there a fixed and direct tie between slave ownership and political power. Only in America did slaveholders play a central role in establishing a nation and creating representative institutions… The ideas of liberty and slavery had been planted at the same time in the new continent’s virgin soil.” He quotes Henry Wilson: “Slavery, from the day it entered the harbor of Jamestown… was an alien in America, an enemy to law and order, liberty and progress.” ⁶⁰ Unfortunately, after World War II, a strong, highly emotional, progressive human rights revolution of historic proportions collided with an equally emotional, politically powerful counterforce, highlighted by the post-1980s Republican movement and its conservative supporters of corporate, religious, and social issues. The resulting convergence of highly conflicting and emotional differences of cultural values and national priorities has created a chaotic instability that will take decades to resolve; hopefully, a new generation of more rational and compassionate business and political leaders will emerge and return the nation to the just policies of a more perfect democracy. The Rights Revolution Wins Big in 2012 Elections The 2012 general elections may represent a turning point in blunting the rapid expansion of far right politics of the new ultra-conservative Republicanism and its hostile strategy of noncompromising politics. After his nomination, Republican presidential candidate Mitt Romney gradually became more politically moderate than the party’s dominant right-wing core, including older Deep South voters and Christian conservatives; the party’s agenda for the 2012 elections didn’t pass muster with the nation’s voters.

Of President Obama’s total re-election votes, 45 percent came from minority groups, which included the votes of 93 percent of blacks, 71 percent of Hispanics, and 73 percent of Asians. Obama received 55 percent of the votes from women, which were skewed by Obama receiving votes from a large majority from single women and Romney receiving votes from a majority of married women. Mitt Romney captured 59 percent of the white votes, including 52 percent of men. Hence, the Republican party’s domination by older white males and their wives has obviously become too narrow a voter mix for America’s traditional melting pot of skin colors and national origins. ⁶¹ Of major importance to supporters of the rights and freedom revolution, voters in the states of Maryland, Maine, and Washington supported same sex marriage, joining six others (Connecticut, Iowa, Massachusetts, New Hampshire, Vermont, and New York) plus the District of Columbia. According to an ABC News-Washington Post poll, 51 percent of Americans support gay marriage. Additional election results included marijuana use being supported in the states of Colorado and Washington, which became the first states to legalize its recreational use. Massachusetts voted to legalize medicinal marijuana use, making it the eighteenth state to do so. Christian conservatives, a formidable political block for over two decades, were humbled by the re-election of Obama and the national rejection of their campaign agenda against same-sex marriage, legalizing marijuana use, and pro-life Senate candidates. R. Albert Mohler Jr., president of the Southern Baptist Theological Seminary, reacted: “Millions of American evangelicals are absolutely shocked by not just the presidential election, but by the entire avalanche of results that came in. It’s that the entire moral landscape has changed. An increasingly secularized America understands our positions, and has rejected them.” But, perhaps the “moral landscape” viewed by the majority of voters was simply consistent with the principles of a secular democracy. About 78 percent of evangelicals voted for Romney, but as a group they are becoming a declining percentage of the population, as is evident from the declining membership of their large churches, such as the Southern Baptist Convention and the Assemblies of God, which have acted as an organizing base for the Christian movement. ⁶² It is revealing to examine the nation’s science/anti-science polarization as a function of political party and ideology. In June 2009, the Pew Research Center conducted 2,533 on-line interviews with members of the American Association for the Advancement of Science under the direction of Princeton Survey Research Associates International. The scientists interviewed subjects who self-selected their party and ideology. Reported political associations include 6 percent Republicans, 32 percent Independent, 55 percent Democrats, 9 percent conservative, 35 percent moderate, and 52 percent liberal. These findings are consistent with the division of the two parties on the question of climate change and evolution. ⁶³ In an article entitled A New Southern Strategy , Karen L. Cox states, “As we saw in this election, today’s Republican party has become the bastion of

white voters, and not just within the South. There is evidence that ‘whiteness’ is not a foolproof strategy in the region, given its changing demography.” ⁶⁴ She points out that voter support for Obama was sharply divided within the South as well as nationally, representing an urban-rural or progressive-conservative division. “So while if we’re going to apply the term ‘Confederacy,’ then perhaps we can all agree that while a majority of southern white voters seem intransigent to change, the region is nevertheless being transformed by its changing demographics.” Nationally, small and large cities gave large majorities to Obama over Romney, while Romney captured towns and rural areas by solid margins. Cox notes that specific major southern cities provided large voter margins to Obama, including Charlotte, Atlanta, Nashville, New Orleans, Birmingham, and Jackson, while their rural populations voted overwhelming for Romney “because they are part of the same urban-rural divide that drives voting elsewhere” in the nation. Fulton County, Georgia, which includes Atlanta, is the state’s most rural county and voted for Romney, but the city of Atlanta voted 64 percent for Obama. This urban-rural divide existed nationwide. In New York State, Brooklyn voted 81.4 percent for Obama, while Hamilton County, in a very distant upstate rural county, voted 62.2 percent for Romney. Western states of California and Washington also exemplify this nationwide trend. Perhaps most intriguing, the Republican presidential ticket and agenda were favored over the Democratic party’s offerings by a combination of strange bedfellows of rural voters and sophisticated high earning Wall Street financiers, corporate executives, and the wealthiest Americans. As a result of the 2012 elections, with the exception of Arkansas’s Democratic governor, Republicans now hold governorships and majorities in both legislative chambers in thirty-seven states, the largest number in sixty years, and control all of the Confederate states, which were totally dominated by Democrats in the 1950s. The geopolitical divide of densely populated coastal states versus less densely populated states of the Rocky Mountains, Mississippi Delta, and Great Plains represent the current cultural gap of the American rights and freedom revolution. “Democrats may want to expand personal liberties, but Republicans have spent the last few years working feverishly to restrict them… . We are moving toward two Americas with two contrasting—and increasingly codified—concepts of liberty.” This is illustrated by the 2011 total of over 1,100 reproductive health and human rights legislative initiatives submitted in fifty states, an increase from 950 in 2010. By the end of the year, 135 of the provisions had been passed in thirty-six states, almost all of which were controlled by Republicans. ⁶⁵

Perhaps the real 2012 election rejection is more fundamental and based on principles of Democracy: the rejection of an ideology that would permit a person to selectively respect and limit the freedoms of others based on limitations they feel comfortable with, relative to their particular religious, racial, moral, or emotional biases. It will be interesting to see if there is now a shift of political philosophy of Republican party candidates for the 2014 elections toward more old-fashioned moderation, adjusting values and ideology in order to win elections. Chapte r VIII Big Money’s Grand Scheme and the Great Recession: Seizing Economic and Political Power (1970s-present) If I were to describe the new rules of the 90s, it would really probably start and finish with the power of the financial markets   .   .   . to really control the destiny, the strategy of the corporation   .   .   .   . Shareholders get rewarded beyond their wildest dreams, but there’s a cost—through stagnant wages, through downsizing and layoffs, through widening inequalities. Capital wins but at a cost. ¹ Steven Roach The American people realize they’ve been robbed. They’re just not sure by whom. ² Gretchen Morgenson and Joshua Rosner During the early 1970s, when he was reporting the Watergate story, it was suggested to Washington Post reporter Bob Woodward that the most effective way to unravel the details of a political scandal was to “follow the money.” Clearly, the flow of money into politics has historically shaped governance priorities, appropriations, and specific legislation as well as influencing political behavior from innocuous favors and legalized corruption to far-reaching fraud. Accordingly, following the post-1970s trail of Big Money’s Grand Scheme reveals the genesis, strategies, and mechanisms contributing to the nation’s 2007 and 2008 economic and financial crises. Vast financial resources allowed the nation’s wealthiest corporations and individuals to attain unprecedented influence over and control of state and national governance systems. Corporate-political alliances have successfully repealed, modified, or eliminated post-Great Depression-era legislation, public policies and agency rules that for decades have more or less successfully regulated the investment industry and managed the nation’s fiscal and monetary policies. As a result, the investment industry was able to execute the sub-prime home mortgage scam and other commercial banking improprieties and frauds that have contributed to the collapse of global markets and severely disadvantaged the American middle class. Accordingly, the primary interrelated factors that contributed to the Great Recession include (1) ineffective, corrupt congressional politics; (2) the increasing power and influence of those with great wealth over governance

processes; (3) expansion of income inequality to historic proportions; (4) the extreme complexity of modern economic and political systems, a stealth factor that invites large-scale corruption and fraud; and (5) the destructive impact of excessive societal egocentricity, competitiveness, and greedy materialism. The most significant lesson to be gained from America’s post-1970s history is the enormously destructive impact inflicted on the nation by those of great wealth in wielding excessive political power and influence. Money remains the primary historic adjuster of human attitudes, values, and behavior. Thus, Big Money has performed brilliantly in its role as the great persuader, acquiring historic influence on public opinion, news media content, and the selection process of candidates for office in all three branches of government at the state and federal level. The movement’s greatest (but unfortunate) accomplishment is the continuing erosion of the economy and the political voice of the middle class, which has paralleled a dramatic inequitable shift of income and accumulated assets to the wealthiest Americans. Big Money’s Grand Scheme has gradually precipitated a deteriorating economy, the collapse of the housing market, the marginalization of organized labor, high unemployment and personal debt, declining government tax revenues relative to national wealth, and a massive lack of confidence about the nation’s future. In the final paragraph of Winner Take All Politics , Hacker and Pierson conclude: Political equality is an abstraction, but the threat it faces from the concentration of economic and political power is not. For all the contradictions of the Progressive movement, reformers of a century ago shared the conviction held by the founding fathers that democracy was the rule of the many, not the all-powerful or the fortunate few. It will have to be so again. ³ Origins and Mechanisms of Big Money’s Grand Scheme Since the late 1970s, America’s major corporations and a conservative wealthy elite have systematically gained excessive political influence over the nation’s federal and state governance systems. What began, over three decades ago, as a reasonable reaction of the business community to an escalation of federal legislation regarding taxes, regulation, and labor union issues, deemed unfriendly to business, led to the creation of Big Money’s Grand Scheme. Its almost immediate successes of blocking tax reform, consumer protection, and labor union wage and benefits legislation and of materially supporting the success of raising payroll taxes and defeating a capital gains tax increase, catalyzed a much broader vision of corporate political power and influence. Based on continuing accomplishments, the utilization of unlimited wealth, highly proficient organizational skills, and strict ideological discipline, a core of prominent corporate leaders expanded their membership and activities over the ensuing decades, becoming increasingly effective in acquiring and utilizing political influence. Big Money’s strategy quickly garnered attention and provided unprecedented levels of financial support for both political parties. The addictive nature of large financial donations, available without asking and

capable of financing one’s next election, became the all-powerful political force, which dramatically enhanced the power and influence of business over legislation. By the turn of the century, the consequences of a creative form of legal bribery had severely disrupted and eroded the ethics and usefulness of governing institutions and, most importantly, was able to erase the economic gains of the middle class that had been achieved during the 1950s and 1960s. As a result, in less than four decades, the nation was saddled with the same socio-economic and political defects that characterized the era leading up to the Great Depression. America was traveling the pathway toward another severe recession. This gradual, insidious socio-cultural transition replicates the same attitudes, behavior, and socio-economic conditions that existed in American history from the late 1870s to 1929. Thus, it is instructive to compare and contrast the political factors and principal actors of this period with that of the pre-Great Recession period. Whether one considers the extreme conservative movement during the last few decades as a blessing or a curse, it has resulted in vast systemic cultural changes, which have had a stifling, corrosive effect on American politics and socio-economic outcomes. The genesis of Big Money’s Grand Scheme was formalized in the late 1960s and early 1970s, as American business was becoming increasingly concerned with government’s expanding regulatory policies and its restrictive environmental and worker safety rules. This produced a coordinated effort to influence federal government policy by initially establishing a greater Washington corporate and business-related presence, which constituted about 100 offices in 1968, expanding to over 500 by 1978. Additionally, registered lobbyists increased from 175 firms in 1971 to about 2,500 by 1982 and corporate PACs expanded from about 300 in 1976 to over 1,200 by 1982. On the other hand, the 224 labor PACs that existed in 1976 increased to only 261 in ten years, whereas the combined number of corporate and trade PACs increased from 922 to 2,182, outspending labor by about 3 to 1 during this period. ⁴ It is noteworthy that, while in the early 1970s business PACs contributed less than labor PACs, during the late 1970s through the late 1980s, business PACs increased their financial support fivefold. Consequently, by1980, they were spending three times the amount labor was spending. Between 1974 and 1980, the American Chamber of Commerce doubled its membership and tripled its budget, and beginning in 1970, the National Federation of Independent Business doubled its membership over the next ten years. Major corporations expanded their cooperative, consolidated political efforts in Washington, most prominently through the leadership of the Business Roundtable of CEOs; prior to 1980, this group included over half of the Fortune 200 companies, representing almost 50 percent of the nation’s economy. Large corporations demonstrated that vast financial and human resources, utilizing the specialized professional skills of law, public finance, accounting, marketing, and the media, were able to effectively influence the public and successful cultivate political support from both parties. One successful legislative initiative in 1995, the Private Securities Litigation Reform Act,

received bipartisan support; the act was intended to reduce stockholder lawsuits against corporations based on the distribution of false information. This effort was part of a continuing effort to reduce corporate regulation and monitoring of business activities that might be inappropriate but profitable. ⁵ Accordingly, oil, banking, investment, telecommunications, automobiles, and chemical corporations systematically arrived at a position of power where, collectively, business could dramatically influence the nature, ethics, and vitality of the nation’s economy. It has become common for lobbyists to spend, as officially reported, in excess of $3 billion a year, which is substantially enhanced by unofficial channels of money. Additionally, Big Money added the “think tank” concept to its arsenal of tools of influence , designed to manipulate American political opinion and public policy and to supply politicians and pundits with scripted talking points, formulated by think tank academic types and former political office holders and their staffs. Hence, during the 1960s and 1970s, wealthy individuals and family foundations and corporations created conservative intellectual propaganda machines posing as pseudo-academic research organizations to contribute a biased conservative message to various public media outlets. Such think tanks include the American Enterprise Institute and the Heritage Foundation, whose financial supporters include such recognizable family fortunes as Coors, Mellon, and Koch. Such right-wing think tanks and like-minded media, such as the Public Interest and the America Spectator, combined with associated Washington lobbying efforts, all with unlimited funding, have become a dominant force in forging public opinion and in manipulating American politics. Thus, major corporations, wealthy individuals, and special interest groups provide funding for a variety of endeavors that address social and economic issues, policies, and objectives intended to win the minds and political support of office holders, opinion makers, and voters. A proliferation of carefully selected and masterfully construed messages are created and distributed, in some cases posing as an unbiased education of the public but, most often, proselytizing to shift public opinion and political dynamics toward defined conservative objectives, often employing incomplete, misleading, or inaccurate information. These political efforts are shameful examples of a lack of intellectual integrity and ethics at their worst, but they are tolerated, as is hate speech within a democracy. It is instructive to examine the historical aspects of this conservative movement, its successful manipulation and control of American governance, its harsh and ruthless tactics, and its increasing popular support, which has intensified. Consolidation and Solidarity via the Influence of Wealth Beginning in the 1960s and 1970s, American business more vigorously challenged government efforts to impose, as business costs, socially oriented objectives of employees, environmental regulations, and consumer protection responsibilities. These perceived intrusions of government, attempting to restrict the free market mechanism, were viewed as violations of the private rights of commerce and precipitated unified corporate actions

to seek protection under the US Bill of Rights. Thus, government efforts to protect individual rights associated with employment, the environment, and consumerism within a modern industrialized nation were projected as being in conflict with the rights of private corporations to maximize profits. The ensuing struggle of private corporate power, challenging public power and the so-called regulatory state, catalyzed a major unification of business to cooperatively plan, fund, and lobby for common interests. Consequently, the mission of mobilizing resources of the corporate sector and the wealthiest Americans to influence elections and gain control of the political and governing processes was dramatically escalated. Supercitizens created an extremely effective system of “superempowerment” over the nation’s governance system. ⁶ Over the years, corporations have achieved protection under five of the ten amendments to the Constitution, including rights of corporate free speech, freedom from unreasonable search and seizures, prohibition of double jeopardy, and rights of trial by jury in criminal and civil matters. Arguably, the most controversial application is the First Amendment’s right to free speech in equating an individual’s right to that of a private corporation. In 2010, the Supreme Court’s Citizens United vs. FEC decision stipulated that “money expended in a political campaign equals speech and is therefore protected.” ⁷ Rothkopf comments: There is no other democracy or country that claims to have a democratic character that has come to grant corporations such a privileged role in its polity as has America. Over two centuries, this country has gone from a debate about whether corporations should even be mentioned in the Constitution to a situation in which these artificial persons are granted the same protection as individual citizens, but of course in granting resourcerich, immortal entities such rights, one is able to fashion an extraordinary role for them. ⁸ A review of recent legislation and court decisions regarding the evasive efforts of the money class to avoid regulation is revealing. In 2002, as a counteraction to the increasing influence of unprecedented, unlimited money being funneled into election campaigns, Congress passed the McCain-Feingold law, which prohibited unlimited donations or “soft money” by corporations, unions, and wealthy individuals to political parties for “issue” ads directly supporting or attacking candidates. To evade the objectives of the new law, “soft money” intended for “issue ads” was simply rerouted to so-called 527 committees, such as the infamous Swift Boat Veterans for Truth group that attacked Senator John Kerry during the 2004 presidential election. However, the 2007 Supreme Court Wisconsin Right to Life case allowed unlimited donations by corporations, unions, and other special interest groups for issue ads until the day of the election, provided they do not urge voting for or against a particular candidate. Obviously, such groups could restrict the content and political drift of their issue ads so as to be easily recognizable and coordinated with a given candidate’s political positions, and so they did. This ruling resulted in the use of the 501(c) groups in order to accept unlimited anonymous donations .

Subsequently, the 2010 Supreme Court’s Citizens United ruling allowed independent groups to fund campaigns ads and to indicate their support of or opposition to specific candidates. The Super PACs then became the strategy of choice, illustrated by the successful $26.6 million America’s Families First Action Fund in 2010. During the 2010 congressional elections, corporations, unions, and other special interest groups spent approximately $300 million on campaign ads. Corporate campaign donations via 501(c)s and Super PACs were about $140 million, compared to zero in 2006, which was prior to the Supreme Court decisions. ⁹ The 2010 Supreme Court’s 5-to-4 Citizens United decision, based on the First Amendment free speech provision, equated the Constitutional right of all citizens to free speech with the right to financially support, without limits, all aspects of the nation’s election system. Additionally, this right of individuals to free speech was also equated to the free speech of corporations. Essentially, the court’s opinion narrowed the definition of political corruption to quid pro quo corruption, with Justice Kennedy writing that political spending does “not give rise to corruption or the appearance of corruption… . Influence over or access to elected officials does not mean that these officials are corrupt.” ¹⁰ In the court’s narrow view, this may appear to be an accurate legalistic portrayal of reality, but clearly members of Congress have benefited from the legality of having their loyalties acquired over time, thus avoiding the illegality of receiving payment for quid pro quo votes or legislative favors. However, such behavior does not appear to meet this Court’s test of undue political influence or corruption. However, previous courts and most Americans realize that the politician who raises the most money; uses the latest technological communication distribution system; and produces attention-grabbing, negative, and misleading promotional materials has a decisive advantage on Election Day. Politicians also know the imperatives of meeting the desires of the big donors. Not surprisingly, those with the greatest wealth understand this tactic well, as they invented it, and the lobbying business has become a thriving, highly efficient, and effective industry for large investments. The Sunlight Foundation, a nonprofit, nonpartisan organization that monitors the degree of government transparency and accountability, notes that in the 2010 election, 26,783 individuals, or about one in ten thousand Americans, contributed more than $10,000 to national election campaigns. ¹⁰ The total of $774 million represented 24.3 percent of all the giving from individuals to politicians, political parties, PACs, and independent expenditure groups. “Overwhelmingly, they are corporate executives, investors, lobbyists, and lawyers… the average 1 percent of the 1 percent spent $28,913, more than the nation’s median individual income of $26,364.” Additionally, this donor group of top earners, who provided more than $10,000 (in 2010 dollars), has more than quadrupled, from 6,456 in 1990 to 26,783 in 2010. They accounted for 28.1 percent of all itemized donations over $200 in 1990, which reached 44.1 percent in 2010. The average donation in 1990 was $13,443, but more than doubling to $28,913 by 2010. ¹¹

In recent years, Big Money gained large legal victories in dominating American politics. Wealthy individuals, nonprofit organizations, and corporations gained unprecedented political influence over the primary election process and, thus, on the selection of the party’s ultimate candidates. Abundant resources have permitted a proliferation of unparalleled carpet-bombing of television, print, and telephone political messages. During the 2012 presidential election, the avalanche of false and misleading information overwhelmed any attempt to provide accurate information and rational opinions. Utilizing the Supreme Court’s latest decision and other legal rulings, PACs are free to do a candidate’s dirty electioneering with unlimited anonymous donations while remaining legally detached from the candidate. The 2012 presidential elections fully utilized the unlimited Super PAC concept. The Wall Street Journal reports that Super PACs spent a total of $566.6 million for the 2012 elections, with $342 million spent on the presidential race, led by Restore Our Future ($142 million), a Romney support group, followed by Priorities USA Action ($64.8 million), an Obama support group. Total Super PAC spending breaks down to $74.5 million for “support spending” and $267.5 million for “oppose spending,” or a 3.5:1 ratio of negative to positive spending. “Support spending” for Romney was $25.1 million, compared to $18.1 million for Obama, and $150.1 million “oppose Obama” spending compared to “oppose Romney” spending of $77.7 million. ¹² It has been estimated that as much as a total of $6 billion was spent on the 2012 presidential election. The flow of special interest money into judicial elections has followed the same trend and sordid behavior of the nation’s wealthiest class as in congressional and presidential elections. Such a negative political culture and the judgment of the Supreme Court’s Citizens United decision brings into question the wisdom of electing judges as opposed to appointing them for life. In 2012, thirty-two states held contested elections or retention votes for judges on their highest courts. In six states where election spending has been especially heavy, the Center for American Progress notes, “The high courts that have seen the most campaign spending are much more likely to rule in favor of big businesses and against individuals who have been injured, scammed, or subjected to discrimination.” ¹³ In 403 cases between 2000 and 2010, the courts favored corporations 71 percent of the time, which the Center deemed unusual. The Brennan Center for Justice found that about 40 percent of spending in elections nationwide for top state courts in 2009-2010 was from lawyers, lobbyists, and business interests. In its full state of maturity, the success of Big Money’s Grand Scheme has been successful in altering the political culture by masterfully implementing a unified and coherent message that embraces conservative principles and objectives of wealthy individuals and of special interest groups as well as corporate goals of increasing profits, wealth, and political control of the economy. Appropriately, the strategy has coalesced these objectives from disparate, like-minded sources of political support into a winning amalgamation of appealing conservative goals, issues, and ideals in an aggressive pursuit of common enemies.

Significant political and financial support has also been forthcoming from small businesses, which anticipated friendly business legislation, as have major corporations, for lower business and personal taxes, fewer regulatory laws, and less government oversight. Business finds it gratifying to counteract perceived federal government abuses of corporate rights, free trade, and other impediments to maximizing corporate profits and CEO compensation. Other supporters are most interested in reversing the progressive social agenda of the last half century. For example, the 1973 Roe vs. Wade Supreme Court decision legalizing abortion provides the Republican party with its “largest and most reliable constituency, the religious conservatives.” ¹⁴ Additionally, the movement finds support from conservative evangelicals by championing beneficial tax policies for private Christian schools as well as the pro-life agenda. To summarize, evangelicals, wealthy elites, major corporations, small businesses, and the general right-wing segment of the population have joined forces to support a carefully crafted plan of political action, influence, and reform. Their common agenda embraces the social framework of abortion, guns, an intolerant religious ideology, anti-immigration, antiscience, and anti-universal health care and an economic schema of low taxes, little regulation, small government, state’s rights, and reduced spending on the nation’s less fortunate. While both political parties have financially benefited from the money people, it was the Republican party that was able, during the 1980s and beyond, to forge a stronger ideological alignment with a more focused, disciplined, and aggressive conservative political philosophy, agenda, and tactics. Many of the nation’s big money sources normally support and still donate to both parties and selected individual office holders, in proportion to who possesses how much and what type of power and who is most willing to be supportive of the donor’s agenda. In any event, since the 1980s, the GOP, historically more closely aligned with the interests of business and the wealthy class than Democrats, have received additional investment funding to create a more sophisticated operational infrastructure, which has proven to be extremely effective. Washington’s Post-1970s Political Culture During the late 1970s and early 1980s, a new breed of GOP politicians began arriving in Washington. Future stars of what was to become a very successful ultra-conservative GOP movement included Dick Cheney, Newt Gingrich, Dick Armey, and Tom DeLay. These soon-to-be-leading players in American politics fit nicely with the conceptual framework of the Big Money movement, and they were quick to take up the torch for corporate financial interests as well as for those groups with a conservative social agenda. Also, as a result of civil rights legislation, a unified 1950s Democratic South had been converted to the new brand of Republican philosophy, and southern leaders such as Phil Gramm, Trent Lott, George W. Bush, and Mitch McConnell emerged during the transition. Thus, the movement was soon to challenge the more moderate national GOP party leadership, escalating the party’s transition to a new brand of more

extreme conservatism. In 1990, President George H. W. Bush was willing to compromise with the opposition and supported a deficit reduction agreement that combined both budget cuts and tax increases, the latter being an unforgivable political sin for many conservatives. Additionally, he had supported clean air legislation and the Americans with Disabilities Act. In the mantra of the new GOP, there were to be no tax increases, no spirit of compromise, no civility toward the opposition, little concern for a social safety net, and no interest in regulating business and the environment. Thus, the first step of the GOP rebellion was to displace the old leadership with a new symbol of Republicanism, which was to be Newt Gingrich. He led the rebellion to undercut President Bush’s agenda, Bob Dole’s Senate leadership, and House Minority Leader Bob Michel. By the turn of the century, the new GOP had established an active agenda and goals, which has come to be labeled “the repeal of the twentieth century” and which included several objectives: eliminating Social Security, minimum wage, the progressive taxing system, and many environmental and financial regulations. ¹⁵ The new political wave had acquired a full complement of extremely conservative shareholders, consisting of distinct blocs of enthusiastic supporters with specific financial, spiritual, political, or social interests. Building coalitions among seemingly dissimilar groups that passionately shared common goals and objectives had created a very conservative political culture. Desired outcomes included increasing business profitability; accepting mutually reinforcing conservative political, economic, and religious ideologies; and dominating economic and political influence in state and federal government. The Gingrich-led GOP is viewed as a turning point from the more constructive, collegial, and consensus-seeking approach among members of Congress epitomized by the House leadership of Tip O’Neill. Jim Cooper, a moderate Democrat House member since 1982, comments that under Speaker O’Neill, “Congress was functional… . Committees worked,” and members knew what they were voting on and were often given several legislative alternatives. Since the beginning of the Gingrich leadership, members have been presented with “one partisan bill.” O’Neill saw his role as Speaker of the whole House, not just the Democrats. “This is not a collegial body anymore. It is more like gang behavior. Members walk into the chamber full of hatred. Nobody has any idea what they’re voting on… . The ignorance around here is staggering. We no longer search for the best ideas or the best policies. Too many people here are willing to deliberately harm the country for partisan gain.” ¹⁶ Dismissing the Bretton-Woods Agreement and Glass-Steagall Legislation A number of major government actions provided the legal framework and momentum that took the nation down the pathway toward the Great Recession. Those most often cited are America’s 1971 unilateral termination of the 1944 Bretton-Woods agreement and the 1999 repeal of the 1933 Glass-Steagall legislation. The chief actors were wealthy corporations and individuals and those associated with the Federal Reserve, Wall Street firms,

bond rating agencies, Fannie Mae and Freddie Mac, and politicians in power positions. At the conclusion of World War II, one of the most pressing tasks for the allied nations was to reconstruct the international economic and financial systems; accordingly, in July 1944, forty-four allied nations signed the Bretton Woods Agreement. This required establishing a system of monetary management among the world’s industrial states, consisting of rules and procedures for commercial and financial relationships. The agreement established the International Monetary Fund (IMF) to regulate a global system of currency. Also, each country was required to operate under a monetary policy that maintained a currency exchange rate based on the US dollar, with the IMF managing temporary imbalances of payments between nations. According to the Bretton-Woods dollar-exchange system, the American dollar was connected to a gold standard that maintained a fixed value currency, as opposed to a floating, good faith currency. In 1971, Milton Friedman, chairman of the Federal Reserve, persuaded President Nixon to unilaterally terminate the convertibility of dollars to gold. Among the many long-term consequences of the United States defaulting on its agreement was the official international disconnect from a fixed currency, that is, a currency based on some commodity’s physical value, subsequently permitting politicians to accumulate yearly paper deficits that have destabilized national economies globally. Career politicians could now become successful in Washington by utilizing the financial principle of borrow, print, and spend, simply passing the debt on to future generations. The termination of Bretton Woods provides an illustration of how the action of government regarding fiscal and monetary policy can lead to major, longterm problems, not due to the nature of the policy change per se but to the flawed behavior it encourages. Thus, by abolishing the Bretton Woods monetary system four decades ago, America established an irresistible political strategy and financial budgetary tactics that encouraged US trade deficits, ultimately contributing to the nation’s current record public debt. This loss of financial and political discipline is more broadly indicative of a gradual shift in the nation’s general attitude toward excessive consumption and debt via attractive, quick, but unwise fixes that avoid legislating necessary, painful, and obvious financial solutions. The current theme that greed is good for America began with Nixon’s 1971 Bretton Woods decision. In response to the banking abuses that contributed to the Great Depression, the Glass-Steagall Act of 1933 mandated a separation between commercial and investment banking. Thus, existing institutions were required to restrict their business activities to either consumer deposits as a commercial bank or as an investment institution. The legislation resulted from a lesson gained, if only temporarily, from the intense fear and suffering of the Great Depression that resulted from banking failures. The government’s role to regulate financial institutions and protect the American population from corporate greed, corruption, and fraud was reaffirmed as being essential to economic prosperity and banking stability. However, within a few decades, as the nation’s economy flourished, the influence of corporate wealth

successfully infiltrated Congress and systematically reduced the restrictions of Glass-Steagall legislation, with predictable negative consequences. Accordingly, the financial sector and their Washington allies were successful in 1999 in passing the Financial Services Modernization Act, which essentially repealed the Glass-Steagall Act. The primary promoter of the cause was a corporate heavyweight, Sanford I. Weill, who wished to merge Travelers Group with Citibank to form Citigroup, which would have been illegal under Glass-Steagall. With the new legislation, commercial and investment banking functions could once again be legally intertwined, as in the years before the Depression, permitting greater risk-taking but potentially creating greater institutional profits. Commercial banks would again be able to engage in unlimited proprietary trading, using their depositors’ money to gamble. Accordingly, the nation’s financial sector was unleashed to create the now infamous sub-prime mortgage instruments; within a decade, troubled financial institutions with unsustainable “toxic assets” led to banks “too big to fail” (but fail their clients they did). The journey from 1933 to 1999 witnessed many key regulatory groups, rating agencies, financial institutions, and individual players demonstrating varying degrees of the greed, lack of ethics, indifference, fraud, and incompetence that had also produced Wall Street abuses in the 1920s. However, this time the private sector players, many of whom transitioned back and forth between positions of government responsibility and corporate leadership, acquired stunning levels of compensation, as did thousands of their employees. One member of Congress, Senator Byron Dorgan, who opposed the repeal of Glass-Steagall in 1999, accurately predicted the disastrous outcome: “I think we will look in ten years’ time and say we should not have done this, but we did because we forgot the lessons of the past, and that that which is true in the 1930s is true in 2010.” ¹⁷ Senator Dorgan was apparently attributing the motivation of the major sponsors of the bill, Senators Gramm, Leach, and Bliley, to an honest but misguided objective to improve the nation’s economy. However, it should be noted that from 1989 to 2002, Senator Phil Gramm, chair of the Senate Banking Committee, was one of the five largest recipients of funds from commercial banks and one of the top five recipients from Wall Street. ¹⁸ Additionally, Senator Gramm’s wife, Wendy Gramm, as chair of the Commodity Futures Trading Commission (CFTC), “granted a ‘midnight order’ that Enron had sought to allow it to trade in self-designed derivatives free of CFTC supervision.” A few weeks later, after she was once again a private citizen, she received a seat on Enron’s board. ¹⁹ Also, Robert Rubin, former head of Goldman Sachs and former secretary of the treasury, who was actively supportive of fewer restrictions on the banking industry and the effort to repeal Glass-Steagall, was subsequently named vice chairman of Citigroup. As an interesting historical note, in the summer of 1998, prior to the repeal of Glass-Steagall, the Federal Reserve Bank of New York deviated from its regulatory role and arranged to bail out Long-term Capital Management, a

hedge fund about to collapse, with a $4 billion rescue package. The “Too Good to Fail” era for America’s financial institutions was thus inaugurated at the multibillion-dollar level. As noted by a former Fed official, “It was a moral hazard moment.” ²⁰ At this point in the story, it is useful to review a few events that led to the repeal of Glass-Steagall in 1999. Gradually and systematically, financial institutions, with the assistance of regulators and politicians, were successful in chipping away at industry regulations, enormously increasing their profitability. In 1992, Congress passed the Federal Deposit Insurance Corporation Improvement Act, which allowed banks to maintain a minimum of only 5 percent of capital to total assets, at that time the lowest in the world. ²⁰ In subsequent years, regulators altered other provisions of the act, which provided even more flexible rules. Regulators increasingly adopted a more hands-off attitude, allowing financial institutions to monitor themselves based on the questionable rationale that the institutions themselves were best able to perform this function and that they had a vested interest in maintaining a stable financial sector and an expanding national economy. The obvious flaw with this view of a free market was that the country had previously adhered to this principle before, and it ended badly, with an economic depression and extensive government and corporate corruption, which critically weakened the financial system and the national economy. Additionally, during the mid-1990s, the American financial sector’s efforts to lower capital requirements and to liberalize other investment restrictions were enhanced by the Basel Committee’s 1996 rule. This rule provides international banks with a method whereby less capital could be reserved for more risky assets that were traded than was required for buy-and-hold products. Also, an important new rule by the Federal Reserve essentially permitted complex financial instruments, such as trust-preferred securities (TRUPS), to combine debt and equity principles so that debt instruments could be applied toward the risk calculation of capital, thus presenting the false appearance of a sounder financial condition. By late 1997, $31 billion of TRUPS had been issued, and by 2005, this figure had increased to $85 billion, contributing to rapid rates of institutional growth and bank mergers. ²¹ Finally, in 1996, the Office of Thrift Supervision (OTS), the federal regulatory agency overseeing the saving and loan industry, contributed to deregulation when it removed the restriction on loans with pre-payment penalties. Since this action reduced investment risk, it was quickly adopted for adjustable and fixed-rate mortgages. In 1997, the Department of Housing and Urban Development (HUD) decided that Fannie Mae and Freddie Mac would buy more sub-prime mortgages by lowering underwriting standards for loans they bought or packaged into securities. It should be noted that politicians viewed Fannie Mae and Freddie Mac mortgages as a vehicle to maximize home ownership and thereby achieve the America dream, thus methods whereby low-income voters could qualify for a mortgage had particular appeal for favorable political consideration. On the other hand, the financial industry envisioned appreciable growth and profits if mortgage-lending standards could be

reduced, undesirable industry restrictions could be removed, and lower investor risk could be achieved. This win-win incentive for business and politics would enable Wall Street firms to acquire enormous numbers of subprime mortgages to package into trillions of dollars of mortgage-based securities. The Urban Institute, an economic policy research group, was asked by HUD to review Fannie’s and Freddie’s effectiveness in lending to low-income persons in underserved areas. Its report, issued in April 1999, judged that underwriting standards were too high, that more flexible loan products were needed, and that more low-income loans could be written. It should be noted that three of the four authors of the report “had extensive ties to Fannie Mae… and all three had been on the receiving end of research money from the Fannie Mae Foundation.” ²² Three months later, new affordable housing goals were established for Fannie and Freddie, which included new rules requiring that 50 percent of mortgage loans issued would benefit low—to moderate-income families, with the expectation that twenty-eight million families would be served. Beginning in 1992, this percentage had been increased from a required minimum 30 percent to an actual 42 percent by 1999, before being raised to the new minimum of 50 percent in 1999. At that time, President Clinton claimed that 66 percent of Americans owned their homes. ²² An additional highly significant piece of deregulation legislation, led by Senator Phil Gramm, still chair of the Senate Banking Committee, was the Commodity Futures Modernization Act, which passed in 2000, exempting derivatives from normal government oversight and thus removing the standard regulation generally required for financial assets. This in turn prompted higher leverage, greater speculation, and enhanced Wall Street profits. ¹⁹ Thus, the regulatory agencies, financial institutions, key politicians, and the leadership of Fannie and Freddie collectively set the stage for the nation to proceed down the money-paved highway to the financial collapse of the housing market, Wall Street financial institutions, and the general economy. In 1994, the amount of sub-prime loans underwritten was $40 billion, increasing to $160 billion in 1999, and reaching $332 billion in 2003. By 2008, Freddie and Fanny held $1.6 trillion in toxic mortgages. ²² What were the congressional oversight committees, the credit rating agencies, the government regulators, and the media doing from 1999 to 2008? What were they thinking? ²³ Post-Glass-Steagall Legislation Era (2000-2008) Historically, even wise financial investment has been duly recognized as a form of gambling but assumedly with the odds being somewhat in favor of the careful investor. However, with the repeal of Glass-Steagall legislation, coupled with ineffective government regulators and regulations and with farcical credit rating agencies, investors in mortgage-based securities during the post-1999 era unknowingly gambled with the odds, which were now much less in their favor than they had assumed. Wall Street investment products became functionally shrouded in clever, extremely sophisticated,

and manipulative strategies that would prove to be exceedingly profitable for the Street, but ultimately highly toxic for investors, the nation, and the world. The sub-prime home mortgage business brought great riches to many firms and their employees, as the old-fashioned values and ethics of serving the firms’ longtime clients, as the financial industry’s primary priority was replaced by unethical and fraudulent goals that boosted corporate profitability and employee rewards. However, a small number of individuals came to recognize the inherent fraud of the short side of the sub-prime mortgage market and bet on its ultimate failure, convinced that the creators of the securities had rigged the odds for failure. Michael Lewis in The Big Short presents case histories of such individuals, who, in their own way, eventually came to recognize that major Wall Street firms were earning great wealth with little financial risk and had transferred huge risk (and most probably financial disaster) to unsuspecting investors. Investment firms, CEOs, and employees were getting very rich from fees collected from creating and selling securities that were inadvertently (or knowingly) doomed to fail. Being quick to dispose of these high-risk bond products was paramount to success by passing on potential risk of financial losses to other parties. Thus, this profitable Wall Street business consisted of paper pass-through transactions, for which investors were unknowingly gambling with odds stacked against them. One defensive argument, which was heard after the collapse of the scheme, was that it was the investor’s responsibility to evaluate risk, a new twist to the concept of a free market: that is, freedom to allow risk to flow to those who don’t comprehend the intended fraud! Interestingly, players on both sides of the gamble became rich. Individuals on the winning side, who bet against the success of the sub-prime home mortgage market, made millions. However, individuals on the losing side who managed the collateralized debt obligation ( CDO) business also received millions of dollars for their advice and a fee for simply processing the paperwork, while losing billions of dollars for investors. Of note, one key Morgan Stanley trader lost over $9 billion of the firm’s money, the largest single Wall Street loss ever recorded, but upon resigning, received millions of dollars contractually owed to him. ²⁴ One the most startling aspects of this historic scam is that most, if not all, of the Wall Street CEOs on the losing side of the gamble, either those who bankrupted their public corporations or those whose private firm was bailed out by the federal government, got rich. They had successfully transferred the ultimate financial risk from the firms’ partners to those of their clients, who had financed the risk but possessed little (if any) understanding of the immensely complex financial engineering, the nature of the products, or the true risks of their rigged investment. ²⁵ Finally, rather than allowing the big Wall Street firms to fail, the federal government acted to arrange for their acquisition or bailout in order to maintain the nation’s financial stability. The troubling principle established by such action is that such bailouts may have now become standard practice for financial firms that take excessive risks, knowing they will be saved from

bankruptcy by government action while enjoying significant compensation from failure. Michael Lewis comments: The moment Salomon Brothers demonstrated the potential gains to be had from turning an investment bank into a public corporation and leveraging its balance sheet with exotic risks, the psychological foundations of Wall Street shifted, from trust to blind faith. No investment bank owned by its employees would have leveraged itself 35:1, or bought and held $50 billion in mezzanine CDOs. I doubt any partnership would have sought to game the rating agencies, or leapt into bed with loan sharks, or even allowed mezzanine CDOs to be sold to its customers. The short-term expected gain would not have justified the long-term expected loss. ²⁶ Goldman Sachs and the “Big Short” The success of Big Money’s Grand Scheme to influence Washington politics and reduce monitoring and regulation of investment banking provided a new framework for creating more deviously complex and profitable Wall Street products and services. J. P. Morgan initially led the way into a new quantitative era and an enlightened vision of investor risk by utilizing more advanced thinking of the assessment, avoidance, and management of risk and by applying the power of mathematical modeling and probability theory as practiced by applied mathematicians, statisticians, scientists, and engineers. For the investment industry, a mathematical representation of financial risk was capable of quicker, more precise, and sophisticated thought processing and decision-making. These more advanced quantitative methodologies were able to more effectively and profitably manage a broad diversity of risk by realizing that diversity of investments can reduce risk and minimizing or totally shift risk to others. Thus, new investment products, collateralized debt obligations and credit default swaps, were created to minimize, diversify, and shift risk, which are described by the following sequence. First, an investment firm, such Goldman Sachs, bundles a large number (or portfolio) of home mortgages into a security, obtains a credit agency’s rating, and then offers the product to institutional investors, who may invest and become the security owner and risk-taker. Second, investment firms could also offer another type of security, which is referred to as a derivative , so named because it is derived from another security. The CDO, derived from a mortgage-based security, has future value that is dependent on homeowner repayment performance over time and on avoiding default. The CDO investor owns no tangible property. Third, the credit default swap may be viewed as an insurance-type instrument, which may be used to minimize and to quantify the CDO investor’s risk. For example, a hypothetical $100 million in credit default swaps purchased at a relatively low premium serves as financial protection against loss (i.e., insurance against default of a security). If the investment proves to be successful, the policyholder would collect nothing but will receive $100 million if the security defaulted. Thus, the credit default swap is a bet on an event, which has only two possible outcomes, either financial success or the failure of default.

Based of these investment tools, it is possible to illustrate the Wall Street scam of the big short . Michael Lewis notes that “Goldman Sachs created a security so opaque and complex that it could remain forever misunderstood by investors and rating agencies: the synthetic sub-prime mortgage bondbased CDO.” ²⁷ However, in 2010, the SEC charged Goldman Sachs and one executive with civil fraud; the details of the case provide insights into the Wall Street culture. Initially, a hedge fund manager and Goldman client, John Paulson, paid the firm $15 million to establish a mortgage-related CDO, which was then offered to institutional investors. However, the SEC charged that Goldman made “materially misleading statements and omissions” by failing to disclose to institutional investors that Paulson, utilizing the credit default swap instrument, was betting on default of the home mortgages and that he had a role in the initial process of selecting the mortgages. Within nine months, 99 percent of the mortgage securities had been downgraded, and by betting that the mortgages would fail, Paulson’s profit was reported as $1 billion. As previously noted, Goldman settled the case with the SEC without having to admit guilt and paid a record fine of $550 million. ²⁸ There were many casualties of Paulson’s big short scheme. Mortgage holders lost their investments, homeowners lost, and investors who had faith in Goldman Sachs’s security products and in the rating agencies’ triple-A credit designation lost in a rigged investment scheme destined to failure from the outset. Those who profited from such big shorts may be divided into two groups. Wall Street firms and executives, who either created or ultimately figured out the game plan and played the rigged bet by acquiring mortgages from grossly unqualified individuals. Some minor players on the sidelines came to appreciate the faulty nature and potential profits of the hidden complexity of such investments. Accordingly, Wall Street investment firms adopted, modified, and expanded the initial J. P. Morgan concepts and created additional complex investment products such as sub-prime home mortgages. This provides an excellent case study of how Wall Street’s abandonment of moral and ethical principles and its excessive greed was able to capitalize on the intricacies of these evolving, more advanced, and convoluted investment strategies. It also makes the case for government monitoring and regulation of the financial industry. Given the inevitable success of the big short strategy and potentially unlimited profits, Wall Street needed to resolve two problems. First, it would be necessary to acquire a very large number of sub-prime or risky mortgage securities in a short time period in order to maximize potential profits. A second issue was that in order to create a highly valued and saleable security, it was necessary to acquire a triple-A credit rating from a rating agency. This turned out to be a nonissue, as the rating agencies were eager to secure a share of this new, immensely lucrative market, which they appeared to not comprehend. Thus, they went with the dollar flow. ²⁹ Lewis details how Wall Street overcame the problem of maximizing the number of new mortgages in a short period of time by utilizing the credit

default swap and a “rejiggered CDO” and disguising the risk of sub-prime mortgage loans. The complexity of the rejiggered CDO was necessary to attract unsuspecting investor into buying B-rated securities while believing they were triple A-rated. Goldman Sachs created a solution to gain a bogus triple-A rating that was quickly adopted by other investment firms. By creatively selecting combinations of bonds with truly triple B value, they were able to convince the rating agencies, which were paid a fee by Goldman Sachs for each package of bonds, that 80 percent were supposedly triple A debt. “The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America.” ³⁰ The final step was to overcome the significant amount of money, time, and effort necessary to acquire the envisioned hundreds of billions of dollars of mortgages needed for the magnitude of bundled securities necessary to meet the envisioned potential profits from the big short scheme. This was accomplished by using the credit default swap as a “near replica of a subprime mortgage bond”; the funds paid by credit default investors were used by Goldman Sachs to create another identical security. Thus, the creation of what is known as a “synthetic CDO” consisted of default swaps for which Goldman Sachs was able to get a triple A rating for actual risky triple B bonds. ³¹ Amazing as this appears, investors in credit default swaps were permitted to select a collection of triple B bonds, based on their judgment of their potential success or failure. Lewis uses the example of a $1 billion “so-called triple A”-rated sub-prime mortgage bond being created by the revenue from an investor picking a hundred different actual triple B bonds and buying $10 million of credit default swaps on each (i.e., a “synthetic CDO” totally composed of credit default swaps). “For Wall Street it was a machine that turned lead into gold.” ³⁰ To summarize, post-1970s Washington politics, orchestrated and funded by Big Money, provided the enabling groundwork legislation for Wall Street’s financial collapse and a global financial and economic disaster. The deregulation of the nation’s financial sector by virtue of the 1999 repeal of the Glass-Steagall Act of 1933 permitted, once again, financial institutions to mix commercial banking activity with Wall Street investment banking, while reducing oversight of the financial services industry. The political tactics and subsequent legislative processes over many decades to repeal the GlassSteagall Act is a prime illustration of the dominant influence of focused, selfserving corporate-political-special interest alliances. Absent the repeal of the Glass Steagall Act, the Wall Street investment activities that produced the financial and economic crisis would have been fundamentally illegal, not just unethical, immoral, and a bit fraudulent. The Role of Credit Rating Agencies The credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch were critical elements in Wall Street’s financial scams and, as such, were appropriately courted and compensated to play a key role in the success of the financial sector’s complex security products. Investors looked to and relied upon the agencies’ ratings in order to determine acceptable risk

limits, relative to potential financial returns. Likewise, the government accepted the ratings as “nationally recognized statistical ratings,” which were used to limit risk on certain securities, such as pension funds. Obviously, Wall Street investment products would become more appealing to investors as financial risk appears to (or actually does) become less (or, better yet, nonexistent). Thus, those who craft securities, particularly from inferior quality assets, recognize that smoke and mirror techniques will be required to obtain the necessary high credit ratings for their investment products in order to attract investors. The incentives for creative minds to devise a new level of complexity and deviousness, which would enable more Americans to own their own homes while generating historic corporate profits and employee compensation for the investment community, was the perceived limitless growth potential. Bonds-based single-family home mortgages increased to $350 billion by 1981 and to $3.3 trillion by 2001. ³² Clearly, the Wall Street firms and the rating agencies adopted their own new business strategies to take advantage of an expanding market of great opportunity that produced larger profits than their traditional business. Historically, the business of credit rating agencies was primarily based on corporate bonds, but it was quickly appreciated that rating mortgagebacked securities was a new opportunity to significantly increase profits. For example, Moody earned about $250,000 for rating a mortgage security of $350 million in assets but only about $50,000 from a comparable-sized municipal bond. Moody’s total earnings in 2006 for its “structured finance” business, which included mortgage-backed securities, was $900 million, which was a 63 percent increase from the $553 million in 2004. In 2006, Moody’s structured finance revenues accounted for 44 percent of its $2 billion revenues. ³³ Wall Street was enormously successful in hiding risk from investors and rating agencies by utilizing dubious techniques of securitizing riskier mortgages and credit enhancements, which the rating agencies amazingly accepted as a basis for rendering a higher credit rating than deserved and which misrepresented the investment risk. Interestingly, these techniques had the tacit encouragement of the federal government, as they paralleled those of the Resolution Trust Corporation’s dealing from the aftermath of the failed savings and loan industry. ³⁴ Historically, rating agencies had been quite selective in bestowing the triple A rating, as illustrated by the fact that in 2007, only six companies had received the top rating. However, tens of thousands of mortgage-backed tranches were rated triple A, which continued up to the bursting of the housing bubble. “Underwriters often added credit enhancements to boost the percentage of triple A tranches… . Nowhere in the process was anyone required to conduct real-world due diligence about the underlying mortgages.” As one Moody’s executive stated at the time, “There is a lot of rating shopping that goes on… . People shop deals all the time.” ³⁵ The inept performance of the rating agencies during the last few decades warrants little future public confidence in their ability to meet their basic

responsibilities to the nation’s economy and deserves investor skepticism toward specific rating assignments. The rating agencies responded to financial opportunism with the same deficient professional conduct exhibited by the Wall Street firms, major American corporations, Congress, and commercial banks. It is noted that Standard & Poor’s placed triple A ratings on Enron just days prior to its 2001 bankruptcy, and not a single analyst lost his or her position. More recently, inappropriate ratings were repeatedly associated with subprime junk securities, quickly becoming toxic waste and contributing to the 2008 financial crisis. Additionally, S&P assigned an A rating to Lehman Brothers within the month of its collapse, which ignited the global financial meltdown. Just prior to S&P’s now famous 2011 downgrade of American creditworthiness to a double A status, their preliminary draft, shared with the Treasury Department, was found to contain an obvious $2 trillion error. But possibly the most accurate and useful message of the S&P downgrade report was, “The downgrade reflects our view that the effectiveness, stability, and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges.” Furthermore, the decision was seen as a judgment of the nation’s political leadership and “the gulf between the political parties.” ³⁶ Thus, while the S&P report received sharp, skeptical reviews of its assessment of America creditworthiness, there were few who disagreed with its conclusion of the nation’s weak and ineffective “policy-making and political institutions.” However, a “weak and ineffective” S&P as well as Moody’s and Fitch were co-conspirators with the Wall Street financial firms and government regulators in precipitating the global financial collapse. Aftermath of the Great Recession By the first decade of the twenty-first century, the Big Money’s Grand Scheme had been successful in manipulating Washington politics and achieving (1) historic low tax rates and major tax loopholes for corporations and the most wealthy; (2) the greatest inequities of income distribution since before the Great Depression; (3) the collapse of middle class purchasing power due to three decades of stagnant income; (4) forty-six million people below the poverty line, the highest number in fifty-six years; (5) the repeal of the Glass-Steagall Act of 1933, the legal enabler of bank deregulation and the sub-prime home mortgage scam; (6) the greatest financial and economic recession and associated suffering within the lower and middle classes since the Great Depression; and (7) by 2011, one-fifth of national income and one-third of the nation’s wealth residing in the hands of the wealthiest 1 percent of the population. In April 2013, the Dow exceeded 15,000, establishing a new all-time record. As a side note, Big Money’s influence extends beyond conservative politics and governance. The Texas Republican party’s platform of 2000 called for eliminating the minimum wage, Social Security, the Federal Reserve, and the federal income tax, an unfettered endorsement of societal chaos. ³⁷

In the aftermath of the 2008 Wall Street financial crisis, and with the complete absence of any sense of remorse, the Street’s relentless, unethical pursuit of corporate wealth quickly returned, a sad commentary on the leadership of the investment industry and for the nation’s economic future. Politicians, major corporate leaders, and special interest groups, unfazed by their culpability in creating a global financial disaster, quickly initiated lobbying activities to block potential legislative initiatives designed to protect the nation against the repeat of massive investment fraud. Additionally, corporate profits and excessive executive compensation quickly returned to pre-recession levels, illustrating the immunity of large corporations and politicians to public opinion and recessionary economic conditions. An analysis of 2010 executive compensation by Equilar shows that the median pay for top executives at the two hundred largest companies was $10.8 million, a 23 percent increase from 2009; cash bonuses increased by 38 percent. Executives in the media and communications sector—Viacom, CBS, DirecTV, Comcast, and Disney—were the most rewarded, followed by commodities and oil (ExxonMobil). In comparison, the average American worker received a take-home pay of $752 a week, a 0.5 percent increase from 2009, which, after adjustment for inflation, was a reduction in income. ³⁸ According to SNL Financial, by the end of 2011, three banks each had assets of at least a trillion dollars: JPMorgan Chase ($2.3 trillion), Bank of America ($2.2 trillion), and Citigroup ($1.9 trillion); Goldman Sachs had assets of $950 million. In the 1980s, the ten largest banks held less than 30 percent of bank deposit assets; by 2012, that had grown to 54 percent. Significantly, history demonstrates that these banking institutions became too big to fail as a result of their capabilities in a competitive global market, not the creation of government. ³⁹ On July 21, 2010, in response to abuses within the investment community that contributed to the late-2000s recession, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. The act contained sweeping changes to regulation of America’s financial services industry. The massive level of opposition to this legislation may be measured by the Center for Responsive Politics’ estimate that $1.9 billion was spent on lobbying activity during the two years prior to its passage and the following year, attempting to oppose or modify the law. This included utilizing about 3,000 lobbyists. ⁴⁰ The London Telegraph commented on the political power of the US banks: “Such is the lobbying power of the Wall Street institutions that they not only caused a global economic crisis and then forced the US government to pay for a massive bail-out but then used a slice of that bail-out cash to bribe politicians with campaign donations in order to block rule changes that might prevent a repeat performance.” ⁴¹ Most onerous for the financial community is the inclusion of the so-called Volcker Rule, intended to prevent the type of derivative trading that was responsible for the financial sector’s 2008 meltdown. The power of Wall

Street money to influence legislation aimed at preventing a reoccurrence of the 2008 Wall Street crisis has been evident in every step of the pre—and post-legislative sessions. Business interests view such government regulation as creating investment uncertainty within the business community and endangering economic recovery. Supporters of the legislation, such as the Council of Institutional Investors, see important safeguards for pension funds, endowments, foundations, and investors in general. Ann Yerger, the council’s executive director, said, “Excessive risk by Wall Street fueled the market meltdown that wiped out millions of US jobs and billions in retirement savings. The Dodd-Frank Act, if implemented as intended, will be a critical bulwark against such massive abuse of investors.” ⁴² In the year following Dodd-Frank becoming law, Wall Street unleashed its lobbyist to attack the three hundred new rules propagated by the Securities and Exchange Commission (SEC) and other agencies. Led by the US Chamber of Commerce, an effective strategy was adopted of using judicial rulings to stall or eliminate new rules as they were created. The chamber has hosted Washington meetings of lawyers to identify the future big cases or “Dodd-Frank excesses.” The approach appears, by design, to consciously avoid expensive, drawn-out challenges to the legislation itself, preferring to bring individual legal challenges to some of its basic provisions. To date, such identified challenges have included a whistleblower provision and curbing speculative trading. Successes include a federal appeals court decision striking down a rule that would have more easily enabled company director nominations and delaying a number of SEC rules. One member of the Commodity Futures Trading Commission, commenting on the legal business generated by Dodd-Frank, said, “There’s an old saying in Washington that if you’re not part of the solution, there’s plenty of money to be made being part of the problem.” ⁴³ After Republicans took over the House of Representatives in November 2010, the incoming House Financial Services Chairman, Rep. Spencer Bachus (R-AL), said he believes Washington’s role is to “serve the banks.” ⁴³ And the GOP has done its best this year to follow that directive, by denying regulators the money they need to implement the Dodd-Frank financial reform law, trying to repeal or water down some of the law’s key provisions, and blocking Obama administration nominations to regulatory posts. The massive corporate initiative to reduce or eliminate the potential effectiveness of the Dodd-Frank legislation by mounting a well-funded counterattack is a repeat of past efforts to avoid bringing greater transparency, integrity, and fairness to the nation’s business practices. These corporate-funded campaigns normally follow such legislation intended to safeguard consumer interest and control corruption. The 2002 Sarbanes-Oxley Law attempted to halt an epidemic of fraudulent accounting practices in the late 1990s and early 2000s by such major corporations as Enron, WorldCom, Tyco, and Adelphia, which successfully hid their true values and performances from the public, resulting in investors losing billions of dollars when their share prices collapsed. The law established new, enhanced standards for public company boards of directors

and their executives and for public accounting firms to provide future investors with greater confidence in the security market. Its passage produced the same predictions of dire financial and economic consequences and the same corporate attempts to reduce or eliminate perceived onerous provisions of the law, as did the passage of the Dodd-Frank legislation and the 1933 Glass-Steagall Act. Sarbanes-Oxley legislation was depicted as being too costly for small businesses, negatively affecting corporate earnings, and substantively reducing economic growth. However, corporate earnings and the stock market continued their growth to historic levels until the onset of the Great Recession. It should be noted that while Wall Street contributed in a major way to the Great Recession, firms such as Lehman Brothers and AIG fundamentally misrepresented their companies by cooking the books, which differs from the nature and magnitude of the late 1990s accounting scandals. The black chapter of twenty-first-century Wall Street history was not based on major fraudulent accounting schemes. Importantly, the Sarbanes-Oxley Law more specifically established a greater legal individual responsibility of CEOs and CFOs for company financial statements and, combined with the jail time imposed on Enron, Tyco, and WorldCom executives, seemed to have imposed memorable lessons learned and motivated greater accountability for corporate financial statements. ⁴⁴ Thus, it has become routine in American history that after major corporatepolitical alliance scandals and the ensuing national economic and financial damage, and suffering of millions of citizens, a national outcry for systemic corrective measures and accountability is fought tooth and nail by the same people responsible for the scandal. “But for all of the criticism of DoddFrank, there has been a societal change… . Few can sustain an argument in favor of a gigantic, self-serving and rapacious financial sector. Some kind of financial reform was—and still is—needed.” ⁴⁴ Ironically, major new federal regulations inherently create increases in societal complexities, including additional jobs, government expenditures, and greater private sector profits, and the Dodd-Frank legislation was no exception. In addition to lawyers, large numbers of accountants, financial consultants, risk management professionals, and computing technology personnel are required. Additionally, Wall Street’s computer and associated technology costs from 2011 through 2013 have been estimated at about $3.8 billion. ⁴⁵

The 848-page Dodd-Frank legislation represents an attempt to manage the complexity of risk in modern banking so as to protect the nation from reckless investments that could threaten its financial and economic stability. However, perhaps the compelling issue is not what is too big to fail or too big to manage but what is inherently too complex for investors, financial executives, regulators, and the public to reasonably comprehend so as to avoid major fraud and unprofessional practices. Humankind’s knowledge base and creativity has progressed to a depth and breadth that has, in some disciplines, created a maze of risk complexity, the intensity of which is beyond the general capabilities of human management. Thus, occurrences of unpredictable, cataclysmic socio-economic and financial events, like earthquakes, will continue to loom in the future. In December 2006, prior to the 2007-2009 unraveling of American financial and economic systems, Timothy F. Geithner, then president of the Federal Reserve Bank of New York, commented, “We think the fundamentals of the [economic] expansion going forward still look good.” However, by the end of 2007, the nation was frantically dealing with a financial and economic crisis. ⁴⁶ The New York Times concluded from the transcripts of the 2006 Fed meeting: “The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.” Justin Wolfers, an economist at the University of Pennsylvania, commented on the transcripts: “It’s embarrassing for the Fed… . You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets. My strong guess is that if we had a transcript of any other economist, there would be at least as much fodder.” ⁴⁶ Predictably, despite their contributions to the last Wall Street disaster, the same players and same type of structured financial products, which have avoided regulation, have returned. “The alchemists of Wall Street are at it again.” ⁴⁷ By April 2013, $33.5 billion in bonds backed by commercial mortgages have been issued, a larger dollar value than at the same time in 2005. Dodd-Frank legislation has not changed the old strategies; home mortgages and corporate loans are bundled and ranked according to risk into “securitized” investment products. Chapter IX Keynesian Economics to the Rescue… Again! From Roosevelt to Obama It turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. Some of the deficit is in fact sustainable; just about all of the rest would go away if we had an economic recovery   .   .   .   . And you should recognize all the hyped-up talk about the deficit for what it is: yet another disingenuous attempt to scare and bully the body politic into abandoning programs that shield both poor and middle class Americans from harm. ¹

Paul Krugman Moving into President Obama’s second term, the acrimonious debate and gridlock continues between the two political parties regarding how to resuscitate the US recessionary economy while also addressing deficit spending. The administration proposes expanding federal stimulus spending, increasing tax rates on the wealthy, providing assistance to those suffering the effects of the recession, and gradually reducing the deficit. Republicans insist on more abrupt, draconian budget reductions to social programs in order to immediately reduce the national debt while maintaining low tax rates for wealthy individuals and corporations. Some recall lessons learned from the Great Depression that, based on Keynesian economics, it is necessary for government to directly stimulate the economy during recessionary times so as to boost middle class employment, income, and spending, thereby creating incentives for the business sector to increase production and employment. Others continue to promote the free market model of minimizing taxes, decreasing government regulation, and reducing budgets, except for defense, in order to revitalize the economy. This model will supposedly increase jobs, spending, and tax revenues as prescribed by a trickle-down economic model, whereby greater business expenditures, profits, and tax revenues adequately support government spending and increase consumer purchasing power. Both parties tend to agree that the public debt must be reduced, future budgets must be balanced, unemployment must be reduced, and the rate of economic growth must be increased. However, a tremendous gap exists between the parties as how to accomplish these mutual agreed upon goals. Unfortunately, the primary objective in this era of combative politics has become gaining credit for success, bragging rights for beating the opposition, and securing a competitive advantage for the next election. But of greatest importance to the poor and middle class population is where are the jobs, when will decades of stagnant wages start to rise, why are benefits and pension programs disappearing, and what level of public support will be provided to millions of Americans without adequate health care, education, food, and shelter? As a result of the 2012 presidential elections, it would appear that the majority of Americans agree that the first step in addressing the anemic national economy and legislative chaos in Washington is for both parties to compromise and come to agreement on budgetary priorities. Second, creating jobs via government stimulus spending and providing assistance for those in need should be accomplished in the short term, followed by longer term plans that gradually reduce the national debt and achieve annual balanced budgets. Given the conflicting economic philosophies of the two parties, it is worthwhile examining and contrasting the past utilization of the two extreme models of Keynesian versus free market economics as represented by the libertarian Friedrich von Hayek and championed by the University of Chicago business faculty. Specifically, how have these two economic models served US presidents from both parties, from Franklin Roosevelt to Barack Obama, as they have tackled severe economic times?

Rebounding from the Great Depression As noted in chapter IV, in the aftermath of the Great Depression, John Maynard Keynes proposed a fundamental prescription for the restoration of a recessionary economy based upon the principle that unemployment represents the failure of adequate consumption within the economic system. Furthermore, inadequate consumer demand for goods and services is the direct result of severe unemployment and inadequate middle class income and the loss of consumer purchasing power, which must be quickly addressed. The lack of sufficient middle class income and thus purchasing power in a democratic capitalist economic system represents the joint failure of the business sector and government to adequately nurture the historic basic bargain that includes the voice of labor. Business fails its responsibility to provide adequate and equitable wages and benefits for employees, and government fails its responsibility to maintain a balance of power between business and labor. Today, in America’s second Gilded Age, with the return of the robber barons and historic wealth inequality, it is obvious which segment of this trinity needs immediate emergency first aid. Critics view the disciples of Keynesian economics as stifling business activity and thus limiting economic growth through excessive government prohibitions, monitoring, and regulations. However, during the Great Depression, Keynes clearly recognized the importance of business sector success and its innate relationship to employment: “Nothing, obviously, can restore employment which does not first restore business profits. Yet nothing, in my judgment, can restore business profits which does not first restore the volume of investment.” His methodology to achieve an appropriate dynamic equilibrium among the variables of profit, employment, consumption, and investment necessitates the inclusion of “programs under the direct auspices of the government or other public authorities” and “a reduction in the long-term rate of interest.” ² However, since the time of Reaganomics this prescription has been uniformly rejected by Republicans. Accordingly, following the Great Recession, the Republican party’s position has been to concentrate on austerity measures and reduce expenditures and the nation’s public debt while avoiding costly stimulus programs. This has been translated into reducing tax rates for the wealthy and by implementing severe budget reductions, including those to health, education, and family assistance. This best represents an extremely hands-off approach of free market, libertarian Hayekian economics.

Keynes also addresses the variables involved in increasing employment and tax revenues in order to achieve a balanced budget and avoid incurring significant additional debt during a time of economic recession. He contends, “It is a complete mistake to believe that there is a dilemma between [government] schemes for increasing employment and schemes for balancing the budget—that we must go slowly and cautiously with the former for fear of injuring the latter. Quite the contrary. There is no possibility of balancing the Budget except by increasing the national income, which is much the same thing as increasing employment.” Additionally, while he recognizes the potential for tax reductions to stimulate increased employment, he also notes, “it does not apply to a relief of taxation balanced by an equal reduction of government expenditure; for this represents a redistribution, not a net increase of national spending power.” ³ In the aftermath of the Great Recession, this point has been lost on congressional Republicans. Historically, since Franklin Roosevelt, Keynes’s general theory has served as guidance for presidents of both parties by providing tax breaks for small business and public spending for much needed infrastructure improvements, which increased employment and consumer purchasing power. Roosevelt championed public works projects, new education and research capabilities, and financial regulations that permitted the private sector to profitably invest and produce more goods and services, create more jobs and economic growth, and establish a more stable socio-economic environment that benefited all segments of society. At the close of World War II, Truman’s Keynesian-based economic stimulation package, although diluted by Congress, attempted full employment, provided greater executive powers to control the money supply and trade, and managed tax policy. ⁴ Eisenhower, often referred to as “the first Keynesian Republican president,” ⁵ appointed Arthur Burns as chairman of the Council of Economic Advisers; his chief objective was to minimize economic fluctuations by selective government initiatives. The Eisenhower administration’s “Keynesianism” was credited with blunting minor recession in 1953-54, 1957-58, and 1958-59 as a result of “automatic fiscal stabilizers” including unemployment and welfare deficit expenditures that increased consumer purchasing power and spending, which in turn increased corporate and government revenues. Also, construction of the nation’s interstate highway system was initiated in 1956 as a major infrastructure project and job creator. ⁵ Burns said: Today there is substantial agreement among Americans that the federal government cannot remain aloof from what goes on in the private economy, that the government must strive to foster an expanding economy, and that the government has a definite responsibility to do all it can to prevent depressions. ⁵ In the Kennedy administration, John Kenneth Galbraith, a longtime disciple of Keynes, was influential in the formulation of the administration’s “New Economics.” In 1965, Time magazine named Keynes Man of the Year: “His theories are a prime influence on the world’s free economies… . In

Washington the men who formulate the nation’s economic policies have used Keynesian principles… . By their adherence to Keynes’s central theme, the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government.” ⁶ Post-1970s Abandonment of Keynesian Economics During the early 1970s, the Arab oil cartel’s manipulation of oil production and the dramatic increase in oil prices deeply affected the America’s economy, which experienced little growth and high inflation, an economic condition referred to as “stagflation.” As a consequence, global economic events precipitated widespread abandonment of Keynesian economics, which was replaced, in the mainstream, by the economic principles of Hayek. According to Alan Greenspan, former Fed chairman and a libertarian follower of Hayek’s liberal economics, “Suddenly everyone was looking to restrain inflation, cut deficit spending, reduce regulation, and encourage investment.” ⁷ Hayekian economists are sometimes referred to “freshwater economists,” making reference to midwestern universities, such as the University of Chicago, which became recognized as the cathedral of Hayek’s teachings. In contrast, the northeastern universities became the bastions of the “saltwater economists,” who embrace Keynesian economics. Hayek and followers espouse the free market economic model of rational decision-making, reflecting extreme definitions of competitive self-interest and freedom from government interference. The concept that competitive corporate executives could be considered as “rational decision-makers” and relied upon to engage in the marketplace in the absence of government regulation and monitoring, while avoiding unethical and unlawful conduct and protecting the interest of the middle class, is ludicrous. Two severe recessions within about eighty years, due to major breaches of professional ethics and corrupt responsibility, is not convincing, except for those who have directly benefited from the delusion. In the aftermath of the Great Recession, Greenspan confessed, “I make a mistake in presuming that the self-interest of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms… . I was shocked.” ⁸ For many Americans, his admission was less shocking, as their primary issue has long been what level of government oversight of markets and the financial industry was necessary to effectively serve the public. The general public comprehends that those with great wealth have historically adopted the selfserving economic model of trickle-down economics, which provides the opportunity for a few to maximize wealth while rationalizing anti-altruistic attitudes. Those of lesser means, opportunities, and influence recognize the necessity for greater protection from corporate misbehavior due to the lack of adequate government monitoring, and their experiences are testimony to the abuses of wealth, particularly when combined with purchasing political power. In 1974, Arthur Laffer promoted the concept of adopting a specific tax rate based on the theory that tax cuts should increase spending, generate more

demand, and maximize tax revenues. ⁹ The Laffer curve graphically represents what came to be known as the trickle-down economic theory of Reaganomics. Supply-side economics was a natural extrapolation from Laffer’s concept. That is, increasing production, or the supply, should inherently be matched by increasing consumer demand, which should hypothetically stimulate consumer spending and increase tax revenues, while avoiding budget deficits. Laffer assumed that somehow the middle class would always possess the purchasing power needed to maintain the necessary level of consumption to meet an arbitrary level of production, whereas purchasing power dwindles with higher unemployment and declining wages, which has existed since the mid-1970s. The Laffer concept is the antithesis of Keynes’s “demand-led economic growth based on public spending,” which assumes that government assumes some responsibility for stimulating the required increase in the nation’s purchasing power in times of economic lulls. ⁹ However, a lack of consumer demand is the central problem and must be addressed first in the sequence to achieve an increasing rate of economic growth and balanced budgets. Accordingly, since the Reagan administration, Laffer’s supposed outcomes have not been realized, even thought the top marginal tax rate was 70 percent under Carter, 28 percent under Reagan, and 35 percent under Clinton and George W. Bush. ¹⁰ As both the Great Depression and Great Recession have clearly demonstrated, if lower and middle class consumers are without sufficient income and government assistance, their diminished purchasing power weakens the demand side of the supply-and-demand dynamic equilibrium. This represents a failure of the nation’s system of shared prosperity, which translates into the inability of the economic system to realize its maximum production potential and growth rate. The primary problem is one of inadequate consumer demand due to an excessively unequal distribution of wealth. Nevertheless, since the 1980s, Hayekian economic philosophy has remained the basic doctrine of new Republicanism, as it benefits major corporations and the wealthy class. The financial self-interest of America’s wealthy elite naturally found resonance with the politics of low taxes, less governmental financial and environmental regulation, smaller and uninvolved government, a minimal social safety net, reduced Social Security and Medicare benefits, and cheap immigrant labor. All maximize business profits and increase the income of the wealthiest Americans. In large measure, such economic policies and political attitudes toward the poor and middle class represent the mentality, ethics, and policies that ultimately led to the nation’s two major recessions. An extreme interpretation of a free market economy set the stage for Wall Street corruption and fraud, historic income inequality, inadequate tax revenues, and excessive public debt. In the summer of 2012, Krugman made the interesting argument that Ronald Reagan, based on his “tax and spend” policies during economic hard times, was a Keynesian. ¹¹ He examines government spending levels three years into the administrations of Reagan and Obama, using total

government spending adjusted for inflation and population growth three years into each administration (i.e., first quarter of 1984 and first quarter of 2012). Reagan’s real per capita government spending at the three-year mark was 14.4 percent higher than in 1980, while Obama’s was 6.4 percent relative to 2008 and declining at a rate not seen since the end of the Korean War. The major component of Reagan’s spending was the federal government’s revenue sharing program, which provided aid to state and local governments; combined with their temporary tax increases, this provided a short-term stimulus to the national economy. Such tax and spend policies are now considered hearsay among Republican leaders. Krugman points out that the nation currently suffers from “a classic case of debt deflation” caused by people more inclined to pay down debt and thus spend less on consumer goods and services, which contributes to a weaker and depressed economy. He concludes, “We’d be in much better shape if we were following Reagan-style Keynesianism.” ¹¹ The Return to Keynesian Economics: The Bush-Obama Era Supply-side economics remains appealing among Republicans, as it provides an economic philosophy that is congruent with corporate desires to maximize profits by minimizing taxes; worker wages and benefits; and any direct costs associated with environmental, financial, or other government regulations and requirements. Consistent with the philosophy of pursuing the lowest possible taxes, supply-side proponents eagerly back less government spending, except for the military, which is a cash cow for the corporate sector. They also have supported minimizing social and public spending and encouraging the use of illegal immigrants to reduce labor costs (until the immigration backlash of the last few years materialized). Stiglitz addresses supply-side economics: The supply-side myth argues that taxing the rich   .   .   . will hurt. Every industry has its own version of this myth: cutting back on military expenditures will cost jobs. Cutting back on tax benefits to the coal or oil industry will cost jobs. Industries that contribute to air or water pollution or that create toxic waste claim that forcing polluters to pay for the costs they impose on others will cost jobs   .   .   .   . History and theory argue strongly against supply-side economics   .   .   .   . Today our problem is not supply but demand: large firms at least have the cash on hand to make any investment that they want. ¹² Currently, as a consequence of the replication of pre-Great Depression socioeconomic conditions, supply-side economics has been severely discredited and abandoned by most reputable economists, the exceptions being the freshwater academic group, who have continued to promote Hayek’s teachings, and the politicians, corporations, and the wealthiest Americans, who are reluctant to abandon the good fortune of their perceived economic pathways. According to Krugman:

The specific set of foolish ideas that has laid claim to the name “supply-side economics” is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men. But over the past few decades there has been a steady drift in emphasis in economic thinking away from the demand side to the supply side of the economy. ¹³ The aftermath of the Great Recession has witnessed a broad rejection of Hayekian economics and the loss of former Fed chairman Alan Greenspan’s rock star status, as Keynesian economics returns to the spotlight. Fortunately for the nation, presidents Bush and Obama understood the lessons of history and the severity of the circumstances that produced the Great Recession, which placed the nation in financial and economic peril, and required unprecedented government action. They rose to the occasion and faced the reality that the buck stops at the Oval Office. ¹⁴ Their combined efforts to combat the nation’s impending economic and financial collapse utilized the concepts of Keynesian economics. Necessary government policies and financial resources were utilized to begin restoring financial stability, addressing unemployment, and providing a safety net for those suffering from the consequences of the recession. However, since its initiation in the 1980s, radically conservative Republicanism, becoming more extreme than its libertarian, anti-socialist disciple Friedrich von Hayek, opposed the actions of both Bush and Obama. But even Hayek recognized the need for government intervention to insure that all citizens receive the basics of existence, particularly in time of national crisis: There can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance—where, in short, we deal with genuinely insurable risks—the case for the state’s helping to organize a comprehensive system of social insurance is very strong. ¹⁵ In The Road to Serfdom , Hayek appears to accept some degree of government intervention and competition with business interests in times of severe unemployment. “So far as government plans for competition or steps in where [private] competition cannot possibly do the job, there is no objection.” Wapshott interprets Hayek as projecting a “moral duty to step in, and that was admissible so long as the spirit of free enterprise was not compromised.” ¹⁵ In America’s post-Great Recession period, where corporate profits and the earnings of the wealthiest Americans remain historically high, one could assume that “the spirit of free enterprise was not compromised.” It demonstrates that “neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance.” The 2007 to 2009 chaos within the nation’s financial and business sectors and a failing economy qualify as a time for government intervention, as the private sector was clearly unable to come to the nation’s rescue. Unfortunately, both political parties and the executive

and legislative branches of government seem unable to adopt a middle ground and execute programs to rationally address the fallout from the recession, which, ironically, was the result of Washington’s inadequate performance over the last thirty years. It is revealing that the philosophical extremes, represented by Keynes and Hayek, both support government intervention in extreme times of crisis, particularly to provide assistance to those suffering the most from the failures of government, industry, and banking. Unquestionably, the inadequate performance of government leading up to and subsequent to the recession was not as much based on differences of economic theories and models as on uncompromising combat over political dominance. This is exemplified by the publicly stated objectives and programs of the US Chamber of Commerce, one of the most politically powerful and wellfinanced lobbying groups in America, which has essentially become a wing of the Republican party. It is no longer representative of the ideals of democracy that embrace the common good for all Americans. Today’s chamber demonstrates little if any interest in promoting the general welfare of workers and, more generally, the poor and middle class. Their agenda does not include advocating for adequate public systems of education, health, and social services. The chamber is simply a powerful lobby organization working exclusive for the major corporations and has been instrumental in destroying the constructive working relationships among business, government, and labor, which, until the last few decades, had been fundamental to the success of over two hundred years of American capitalism. The crisis nature of the Great Recession required both presidents Bush and Obama to rely on Keynesian economic concepts in order to address the nation’s financial and economic emergencies. However, as of 2013, it has unfortunately become apparent that the total government effort to stimulate the economy has been too meager. In late 2008, Bush responded to the need for government intervention to avert a continuing financial crisis and commented, “I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity.” ¹⁶ While President Bush, as well as his father, followed Keynesian economic policy, in subsequent years both were highly criticized by their own party for their stimulus policies, as such policies are historically associated with Democratic party dogma. Unfortunately, Obama and the members of Congress have been unable or unwilling, as the case may be, to legislate adequate government stimulation to substantially increase middle class purchasing power, such as public works projects. The nation did not learn an important lesson from the Great Depression and the wisdom of Keynes.

However, Nobel Prize economist Paul Krugman absorbed the lesson long ago and strongly urges larger, sequential government investments in order to appropriately stimulate the nation’s stalled economy. In 2010, he warned of the broader global recessionary issue: “We are now, I fear, in the early stages of a third depression. Around the world… governments are obsessing about inflation when the real threat is deflation, preaching the need for belttightening when the real problem is inadequate spending.” ¹⁷ Another important lesson not absorbed from Keynesian economics and the Great Depression is the rejection of the long-held Say’s Law, “a nonsense theory” which holds that “if people do not spend their money in one way they will spend it in another… . An act of individual saving inevitably leads to a parallel act of investment.” ¹⁸ This assumption of income always being invested or spent has proven to be false. In the aftermath of the Great Recession, US business possesses record reserves, estimated at between $1 trillion and $2 trillion, and a few major banks each hold reserves exceeding a trillion dollars, while awaiting the appearance of greater consumer confidence in the nation’s economy. Meanwhile, the middle class awaits jobs so as to acquire the means to spend, and the country’s economy remains stalled due to an inadequate demand for consumer goods and services. Importantly, Keynes understood the essential difference between selfcentered, greedy individualism and a more altruistic individualism. His view was that economic success within a democratic social order should provide “a wide field for the exercise of private initiative and responsibility… . Within this field the traditional advantages of individualism will still hold good… . Individualism, if it can be purged of its defects and its abuses, is the best safeguard of personal liberty in the sense that compared with any other system, it greatly widens the field for the exercise of personal choice.” Thus, while “personal liberty,” “private initiative,” “the exercise of personal choice,” and free markets must be encouraged and protected, government regulation, monitoring, and balancing the dynamic forces of business and labor are essential to prevent well-documented “defects” and “abuses” of capitalist democracies. ¹⁹ Bush and Obama Address the Nation’s Financial and Economic Crisis In the spring of 2008, in a speech entitled “Renewing the American Economy,” Obama provided his analysis of the nation’s economic policy and the need to implement a balance of “self-interest and community, markets and democracy, the concentration of wealth and power and the necessity of transparency and opportunity for each and every citizen.” ²⁰ However, the 2009-2011 Washington political scene of obstructive politics prevented the Obama administration from implementing a sizeable jobs stimulation program, the fundamental prescription for rebounding from a recessionary economy. Consequently, his agenda, which included an economic stimulus program, altering spending priorities, expanding health insurance coverage, tightening regulation of financial institutions, and addressing climate change, was effectively sabotaged in order to deny the administration a record of accomplishment and prevent his 2012 re-election.

In 2010, a concentration of power and money from major corporations and the nation’s wealthiest individuals was forthcoming in support of Republican congressional election campaigns and accelerated lobbying activity in opposition to essentially all of the Obama agenda, which brought the legislative effectiveness of Congress to a historic low point. Keynesian economic policies to stimulate economic growth and employment were only minimally implemented by Congress, as deficit reduction hawks thwarted any attempts to stimulate employment through government initiatives. However, one successful initiative in early 2008 by President George W. Bush was a $170 billion stimulus package to address the early stage of the nation’s failing economy. One of the major successes in increasing employment and invigorating the nation’s manufacturing sector has been the revitalization of America’s auto industry. Depending on one’s politics, the much criticized Detroit taxpayer bailout or the wise investment to save the auto industry pointedly contrasts Keynesian versus Hayekian economics and the current Democratic versus Republican economic philosophies in dealing with a recessionary economy. It is instructive to review this history. With regard to his efforts to address the onset of the Great Recession, former President George W. Bush stated, “I’d do it again. Sometimes circumstances get in the way of philosophy.” ²¹ In late 2008, Bush responded to the financial insolvency of GM and Chrysler during the early stages of the nation’s economic collapse and a failing Wall Street investment sector, thus avoiding the demise of America’s auto industry. He provided the first phase of funding, amounting to $17.4 billion, as financial experts advised that Chapter 11 bankruptcy was not a viable option. The fallout of shutting down the auto industry would have produced a multiplier effect, which would have closed much of the industry’s suppliers of goods and services and seriously, if not mortally, crippled the financially solvent Ford Motor Company. It is estimated that the cost to the state of Michigan and the Midwest in general would have exceeded one million jobs. This situation was an obvious example of government intervention at a critical time to save a major sector of the US economy when private investors were financially unable to do so. Interestingly, an NBC/Marist poll in 2012 reported that 50 percent of Michigan Republicans, who intended to vote in their presidential primary, opposed this government action. It should be noted that this plan was litigated through the federal court system, including the Supreme Court, and found legal by a wide margin. As of the spring 2012, three years after Bush took his action, Chrysler and GM had significantly exceeded expectations, with GM reporting a yearly profit of $7.6 billion and regaining the top global ranking for sales, and Chrysler is now profitable. The Bush and Obama financial initiatives supporting the auto bailout finally reached $82 billion and has been of relatively low cost to taxpayers. ²¹ GM and GMAC together still owe the government $25 billion, but by August 2012, 250,000 jobs had been added to the industry. Of the $119 billion TARP program, Bank of America, Citigroup, Chrysler, and Chrysler Financial all

have paid off their debt, left the TARP program, and provided taxpayers with a profit. By January 2013, American International Group (AIG) had repaid the $182 billion it received plus $23 billion in interest. Thus, in retrospect, the Bush-Obama strategy of applying Keynesian economics to the auto industry at the time of the Great Recession may be deemed highly successful, particularly since other strategies were not forthcoming, other than allowing the auto industry to go out of existence. Accordingly, it is instructive to review the broader set of economic problems associated with the Great Recession relative to any alternatives available at the time and what has been accomplished to renew the US economy. In the last quarter of 2008, the American economy shrunk, on an annual basis, by 8.9 percent of GDP, the most anemic decline in over four decades, which was followed by a decline of 6.9 percent of GDP and the loss of more than 5 million jobs by February 2009. At that time, less than two months after assuming office, President Obama submitted an $831 billion stimulus package to Congress, intended to address the nation’s economic crisis. Interestingly, the legislation passed, with only three Republican Senators supporting the bill. In the spring of 2012, the third anniversary of the Recovery and Reinvestment Act, House Speaker John Boehner’s review of the legislations was, “These policies have made our economic woes worse… left millions of Americans out of work and made the future of jobcrushing debt even more daunting for our children and grandchildren.” ²² However, this assessment differs considerable from the facts. According to the Bureau of Labor Statistics, from March 2010 through February 2012, the United States experienced twenty-four continuous months of private sector job increases; the jobless rate, which had peaked at 10 percent in October 2009, declined to 8.3 by March 2012 and to 7.8 percent by November 2012. Under the Obama administration, according to the Congressional Budget Office, about 1.6 million jobs had been created, which may reach a total of 8.4 million by 2013. By the beginning of 2012, the nation’s economy had recovered to the extent of the pre-Recession 2007 level. The Dow Industrials level has doubled from 6,547 in February 2009 to exceeding 15,000 in 2013. As of November 2012, it is estimated that during the economy’s third year of recovery, 20 percent more jobs were created than previously estimated. The Bureau of Labor Statistics reported that the economy added 386,000 more jobs than its earlier estimate, bringing total hiring from April 2011 through March 2012 to 2.3 million, with the private sector adding more than 453,000 jobs. The economy has now reclaimed all the jobs lost since January 2009, the month Obama entered office. Actually, 5 million private sector jobs have been added while federal, state, and local governments have reduced public sector jobs. ²² A February 2012 survey of economic experts by the Booth School of Business at the University of Chicago reported that 80 percent believed that the administration’s stimulus package had contributed to lower unemployment by 2010, and four times as many agreed that it was worth the expenditure as those who disagreed. The February 2009 stimulus package cost was equivalent to about 5 percent of the annual GDP, which

was spent over a four-year period. Other administrative initiatives, including the payroll tax cut, extended unemployment assistance, and “cash for clunkers,” raised the cost to about $1.25 trillion, or about 2.1 percent of GDP from 2009 through 2012. According to the New York Times , Kenneth Rogoff, Harvard professor of economics, considered a foremost international expert on the causes, effects, and remedies of financial crises, “says he thinks it unlikely that an alternative path would have delivered a much better outcome. Given the heavy debt burden on American families, he says the pattern of low and volatile growth and the growing deficit ‘would have happened under anyone.’” ²³ Rogoff equates the Bush-Obama stimulus initiatives to the chess concept of the “only move” (i.e., given the circumstances, it was the only option available that would avoid immediate defeat). The Times article notes in conclusion that, in 2005, the governor of Massachusetts, Mitt Romney, proposed a $600 million stimulus package to create 20,000 jobs over a fiveyear period, costing $30,000 per job. ²³ Michael Grunwald’s 2012 book The New New Deal makes the case for the success of the American Recovery and Reinvestment Act in saving existing jobs, creating 2.5 million new jobs, and growing the economy by 3.8 percent, while keeping the unemployment rate below 12 percent. ²⁴ While many individuals are not better off than they were four years ago, the nation’s economy is more stable and productive. Some would evaluate the stimulus plan in terms of percentage increase in GDP, but others would also consider the degree to which the government provided for those suffering the effects of the recession. Accordingly, of the $840 billion spent, $1.5 billion was allocated for rent subsidies and emergency housing for 1.2 million people and increased funding for food stamps, unemployment benefits, and Medicaid to maintain 7 million people at or above the poverty line. Additional long-term investments were made in electronic medical records, broadband Internet access for rural communities, and renewable energy projects. Almost all Americans received a tax reduction, but only a small percentage saw the reduction in their paycheck. While Grunwald assesses the stimulus program favorably, the dissemination of information outlining its positive impacts was found ineffective, as few Americans became aware of the results. It was good economics but poor politics. Republicans learned a lesson from the stimulus the Democrats didn’t expect: unwavering opposition, distortion, deceit, and ridicule actually work, especially when the opposition doesn’t put up a fight. The lessons for Democrats seems equally clear: When government actually works, let the world know about it. ²⁴ In considering what other effective approaches to stimulate the economy could have been pursued since 2009, it is instructive to examine the approaches that other developed nations adopted and to assess their success relative to that of the United States. By early 2009, China had invested about 3.4 percent of its GDP to stimulate consumer spending, while about forty developing and developed nations spent almost 3 percent of GDP. Many European countries, after initially utilizing various economic stimulus

measures, reversed course in 2009 and resorted to only expenditure reductions in their attempts to achieve economic stability. But this strategy only further depressed economic conditions. Great Britain adopted an extreme austerity approach from the onset of the recession and rejected the government stimulation approach. In the ensuing four years, government debt increased and the British economy became 4 percent smaller. ²³ Thus, by the summer of 2012, the intended goal of Western nations to reduce unsustainable debt over a few decades, while simultaneously increasing the rate of economic growth, decreasing unemployment, and increasing tax revenues, remained unachievable. To many, the European remedy of austerity applied during the previous two years failed to stimulate an economic revival; instead, it created worse conditions. European GDP was negative during the last quarter of 2011, and Eurozone unemployment was above 10 percent. Early in 2012, the IMF, World Bank, World Trade Organization, and eight other major economic institutions “warned that austerity was hurting global growth and raising unemployment. They asked the world’s major economies to embrace stimulus.” The IMF has suggested that “the British government soften its austerity program.” ²⁵ Critics of the US stimulus proposals contend that since short-term interest rates are so low, it is not possible to reduce them further, and thus conditions are excellent for corporate borrowing and new investments. Others point out that corporations already have record cash reserves but that the lack of middle class spending power is the problem. But low interest rates permit government to borrow on the international market at almost zero percent, thus providing an attractive opportunity for government to stimulate employment via much needed public works programs and produce additional tax revenue to somewhat offset potential budget cuts. Christina Romer, an economics professor at Berkeley and former chair of President Obama’s Council of Economic Advisors, offers her “more sensible approach” for America’s economic recovery than relying solely on an austerity program. ²⁶ First, identify immediate dollar value budget reductions, specifying the selected programs and how each reduction will be implemented. Second, specify whose taxes will be increased over what time frame, a “backload” tactic capable of eventually producing new tax revenues to compensate for up-front tax cuts. Third, the long-term program of budget and deficit reductions and increased tax revenues should be related to economic indicators, based on the objective of long-term financial solvency and economic prosperity for all members of society.

As an illustration, Romer points to 1983’s successful implementation of a Social Security reform plan that utilized the “backloading” financial tactic, calling for significant changes that included higher taxes and increases in the retirement age to be phased in over three decades. However, this occurred in a political era when legislative comprise in Congress was possible and in the best interest of the nation. Also, in 1995, Sweden implemented a similar strategy, which successfully reduced the deficit by 8 percent of GDP over a three-year period. A year later, Australia accomplished a smaller version of a similar plan. By summer 2013, the economy of the euro area nations, adhering to a strict austerity budgeting philosophy, had shrunk for the sixth consecutive quarter, as excessive austerity proved incapable of stimulating growth but incurred additional debt. “The world’s recent experience suggests fairly strongly that excessive thrift will make us all poor.” ²⁷ This European experience supports the Keynesian proposition that when consumers and business are sufficiently preoccupied with reducing debt, saving, and not consuming goods and services, government must spend to prime the middle class economy in order to re-equilibrate economic supply and demand. Additionally, the attractiveness of near zero percent interest rates provides an incentive for measured government spending to stimulate growth that justifies assuming additional debt, while providing an enhanced capability of gradually reducing long-term debt via enhanced tax revenues. It is noted that the US, following a mild form of government stimulus expenditures, has reduced its 2009 deficit, relative to GDP, of 10.1 percent to 7 percent in 2012. Additionally, from 2010 through 2012, the US was able to rebound from its recessionary GDP plunge with about a constant 2 percent annual increase in GDP, whereas the European Union, Germany, and Britain have all endured continuous annual declines, ranging from 2 percent to negative, 4 percent to less than 1 percent, and 1.9 percent to 0.2 percent respectively. ²⁷ Thus, from a global perspective, as the United States enters summer 2013, it appears that the American approach to recessionary economic conditions— implementing a limited, but inadequate, stimulus program in addition to budget reductions—is producing greater success relative to Europe’s strict reliance on Hayekian economics of only austerity budgets and deficit reductions. The European economic growth rate is significantly less, in at least one case negative, and unemployment rates are significantly higher, with some in the teens. Chapter X Shifting Philosophical Currents of Thought : Self-Interes t Defines Truth and Knowledge Such primordial values as truth and knowledge, so far as their content, criteria, and evidence are concerned, in socio-cultural actuality depend greatly upon the type of culture of which they are a part. In other words what appears to be true and what is not, what appear to be scientific and what is not, what is a valid criterion of truth and what is not, are   .   .   . in a considerable degree a “function” of the socio-cultural variable. ¹

Pitirim Sorokin A society’s general view of what is factual, logical, and acceptable is discernible from its cultural values, attitudes, traits, and behavior, which change over time and affect socio-cultural transitions. Accordingly, a social order’s perception of truth and knowledge will undergo modification as cultural influences alter its relative dependence on faith, reason, the human senses, and human experiences. Thus, cultures continually adapt to circumstances and pragmatically modify beliefs, characteristics, and properties according to the necessities for survival or to achieve a higher order of economic prosperity and well-being. The degree of cultural adaptability influences the attainable level of social harmony, self-sufficiency, self-regulation, and common purpose and, in the long term, the extent and sustainability of socio-economic advancement. The resulting cultural mentality may be considered as a force determined by the nature, intensity, and relative influences of religious and scientific thought. Accordingly, cultures, civilizations, and empires exhibit philosophical-based thinking, wisdom, and behavior, influenced by the disciplines of theology, philosophy, and science. Consider the dominant cultural mentality of America’s 2012 state and national elections, which provided voters with an intense, record-setting dose of the same lack of integrity, professionalism, and substance that the nation had come to expect from its political parties and from the dumbeddown, entertainment-oriented media coverage of politics. The public was inundated with excessive quantities of negative, misleading, and blatantly false messages, extensively financed from anonymous Big Money sources and distributed by organizations with vaguely patriotic names. Many candidates, possessing few prerequisites for high public office, demonstrated a lack of intellect and little knowledge of American history, economics, sociology, and politics. After being professionally preened, tutored, and scripted by handlers, they were selectively made available for exhibition but provided few specific solutions to major issues for the voters. Given many deficient candidates and an overload of convoluted, hostile messages devoid of substance, voters had difficulty finding fact, truth, integrity, sound proposals, or impressive talent. Essentially, any rational process of voter analysis, thought, and conclusion was stymied and displaced by frustration, despair, and fear, including the fear that some of the candidates would actually be elected. Instead, the general public, suffering from a crippling economy and a government incapable of restoring political sanity and economic stability, received little constructive information and few realistic policy proposals during an excruciating long and tedious election process.

This irrational national discourse exemplified how carefully crafted, repetitive propaganda is distributed, absorbed, and digested by the public as knowledge intended to address anxieties, social biases, and financial selfinterests. Focusing on the negativity of current social, economic, and political issues leads to assigning blame and scorn on the opposition, while predicting further catastrophes if the other party’s candidates are elected. This profile represents a nation undergoing self-destruction. This depiction of citizens discovering supposed truth is consistent with Sorokin’s lesson of Western history that “what appears to be true and what is not, what appears to be scientific and what is not, what is a valid criterion of truth and what is not, are… in a considerable degree a ‘function’ of the socio-cultural variable.” ¹ Campaign messages, candidate interviews, and the wisdom of political pundits project supposed truth ranging from distorted to false social, religious, political, and economic information, disguised as valuable public messages. Perhaps the most flagrant breaches of integrity in fabricating truth are the defensive, self-serving anti-science and faith-based social issue messages associated with evolution, climate change, and reproduction and the denial of basic human rights afforded by democratic principles to selected groups who differ from the population profile of colonial times. The Politics of Global Warming Rejection of scientific evidence concerning global warming and its future consequences is an example of adopting pseudo-truth in order to justify comforting ideologies, spiritual beliefs, and business interests. Politicians professing to support such philosophies gain electoral support from voters and financial contributions from donors, a coalescence of political and economic objectives. The near unanimity with which Republican members of Congress reject global warming based on their individual discovery is truly remarkable but happens to coincide with a major corporate interest. However, in order to intellectually embrace this supposed truth, one must ignore a report from the National Climatic Data Center that October 2012 was the 332nd month in a row of above average global temperatures. ² Consider that 34,008 daily high temperature records were established at official US weather stations in 2012, compared with only 6,664 daily low records. The 5.1-to-1 ratio of highs to lows should be considered in the context that as recently as the 1970s, the ratio approximated 1:1, but it has been increasing for decades. ³ In May 2013, scientists reported the earth’s atmosphere had reached “a long-feared milestone” composition of 400 parts per million (ppm) of the most significant heat-trapping gas, carbon dioxide (CO2), a level not present in millions of years. The planet’s CO2 level has remained within a stable seasonal pattern for roughly 8,000 years, corresponding to the period of human civilization. However, since the industrial revolution, the burning of fossil fuels has produced a 41 percent increase in CO2.and, since the 1960s, the atmospheric level has increased an average 25 ppm per decade. Scientists believe that the last time CO2 reached such a level, the climate was warmer, ice caps were smaller, and sea level was 6o to 80 feet higher. ⁴

Additionally, United Nations climate discussions have concluded that ice cover in the area around the North Pole has reached “a new record low” and the loss from March to September 2012 was 5.57 million square miles, an area larger than the United States. The journal Science reports the giant polar ice sheets in Greenland and Antarctica are losing three times as much ice per year as twenty years ago. Greenland’s melt rate is five times higher than in the mid-1990s. This international study involved forty-seven experts using satellite-mapping data and was the first study to combine data from fifty different ice-sheet-loss estimates from the last two decades. ⁴ Those who deny that global warming is due to human consumption of fossil fuels and requires government regulation have organized into a self-serving political cult. It is reported that more than half of the Republicans in the House of Representatives and three-quarters of Senate Republicans do not consider global warming a serious threat; they claim it is not human caused, but an exaggeration or hoax. ⁵ This issue has been a high priority for the Tea Party faction of the GOP. A New York Times/CBS poll found that only 14 percent of Tea Party supporters agree that global warming is an environmental problem, and only 8 percent say there is a problem. In comparison, 49 percent of the remaining general public also said it wasn’t an issue. When asked for their sources of information, Tea Party members cite such conservative opinion leaders as Rush Limbaugh, Glenn Beck, Sean Hannity, and Sarah Palin, and the Bible. Their socio-political idols and their teachings have created their own versions of truth; this is a small but vocal political subculture, reflecting unique values, ethics, attitudes, and behavior. These views also coincide with those of the fossil fuel industry, which has conducted a campaign for decades to dispute the overwhelming scientific evidence of the effects of fossil fuels on the atmosphere and on climate change. The industry, opposing federal policy that is intended to reduce carbon emissions, has helped fund organizations to counteract the scientific findings on climate change. These groups include Americans for Prosperity and Freedom Works, whose objectives are to oppose legislation that would increase the cost of energy and to actively work against the election of candidates for office who support policies addressing climate change. The industry’s campaign has been effective. According to a National Journal survey, nineteen of twenty Republican Senate candidates in 2010 running for election in contested races questioned the science of global warming and opposed any related legislation to restrict fossil fuel consumption by industry. ⁶ Given the realities of the times, party politics, and opportunities for individual success, these nineteen candidates, dismissing overwhelming scientific evidence of climate change, choose a fabricated truth and blindly (and pragmatically) support the party’s unified political position, which will ingratiate them with donors and many voters. Congress avoids any official debate of the topic, as the best way to stay out of political trouble is to avoid the subject and keep repeating the party’s official talking points, which stoke fears of losing jobs and stifling economic growth.

The long history of the chemical industry disputing research about the depletion of the earth’s ozone layer and the tobacco industry’s glamorized marketing tactics to focus on the pleasures of smoking in the face of overwhelming scientific research to its dangers are additional illustrations of the fabrication and promotion of falsehoods for financial gain. In 1974, scientists demonstrated that chlorofluorocarbons, commonly used as refrigerants and in aerosol spray cans, were destroying the protective upper atmosphere, which was aggressively disputed by the chemical industry. These positions represent the standard reaction to scientific findings that threaten corporate profitability. Indeed, in the American corporate culture, as in politics, “what appears to be true [is] in a considerable degree a function of the socio-cultural variable,” which translates into expedient outcomes associated with money and power. Correspondingly, a given era’s social, economic, and political mentality is a reflection of the totality of such dogmatic, self-serving thinking as exemplified by climate change. Stimuli that the human senses interpret as positive feel-good messages and which resonate with the individual’s desires and biases are more apt to be considered true. In modern times, the final test of truth is to find verification somewhere, from anyone, within the vast expanse of the World Wide Web. Thus, one may expect a social order to be representative of a broad variety of cultural mentalities, which fluctuate over time, as attitudes, values, and ethics become modified by various messaging sources that impact the individual’s way of life, ambitions, biases, and the realities of day-to-day existence. A prominent illustration of a major outcome from a culture adopting pseudotruth and knowledge, based on self-serving interests, values, and biases, is the Great White Switch of the former Confederate states migrating en masse over a few decades from a unified embrace of the Democratic party to the overwhelming support by the 1990s of the Republican party, based on the issue of white supremacy. This was the subject of chapter VII. Daniel Kahneman, a Nobel Laureate in psychology, notes a related human limitation of the mind: A puzzling limitation of our minds: our excessive confidence in what we believe we know and our apparent inability to acknowledge the full extent of our ignorance and the uncertainty of the world we live in. We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events. ⁷ Shifting Human Values: Fabricating Truth and Altering Political Culture Human history demonstrates that social orders undergoing socio-political transitions may embrace irrational arguments that selective utilize partial truth to validate desired behavior, sought-after social advantages, and selfserving economic outcomes.

The life of thought endangers every civilization that it adorns. ⁸ Accordingly, since the 1980s, Americans have witnessed a rapid and dramatic socio-political shift within the Republican party toward an extremely conservative political philosophy, which was sparked by 1960s civil rights legislation and intended to end the lingering undercurrents of racial segregation and discrimination in the Deep South. As previously noted, in 1944, when the southern Democratic party was considered as the defender of white supremacy, President Roosevelt was supported by 75 percent of southern white voters. But after President Johnson signed the 1964 Civil Rights Act, Barry Goldwater carried the South in the next election, and subsequently, the three presidential victories of Reagan and Bush captured 80 percent of all southern white votes. ⁹ Also, as previously noted, in the 2010 national elections, over 80 percent of the votes cast for winning Republican House members were by whites. American politics is fundamentally about different moral visions and expectations. White supremacy in the South has been rationalized on supposed cultural deficiencies of blacks, a fundamental component of the old southern culture, which justified social, political, and economic advantages for white people but denied them to people of color. As a consequence of the nation’s continuing and expanding post-1950s agenda of progressive human rights and freedoms, America has become increasingly polarized between conservatives and liberals (and more recently between urban and rural populations). The struggle may be defined by the contrast of providing a broad spectrum of basic human rights, freedoms, and opportunities for all persons versus a narrow set of more restrictive rights and freedoms based on a rigid set of non-compromising ideologies and biases. Thus, dramatic changes in America’s political values and attitudes have occurred, crystallizing into a post-1980s counterrevolution by a regressive conservative element employing aggressive, winner-take-all politics. In many respects, this movement represents a long-festering backlash against the federal government. One might reflect on the 2012 Republican presidential primary debates and the values, attitudes, lack of knowledge, and judgments expressed, not only by the candidates, but also by the audiences. Examples are provided in chapter I. At the core of this movement is the unwillingness of people to respect the fundamental ideals of democracy whereby all persons have the same freedoms, rights, duties, responsibilities, and opportunities to succeed. This cultural attitude is associated with extreme individualism and attainment of personal socio-economic and political advantages at the expense of the rights and general well-being of others: the antithesis of the concept of democracy. Formulation of Political Thought, Judgment, and Choice It is instructive to examine what contributes to and amalgamates a population’s collective philosophical and political thinking, opinions, affiliations, and election-time choices. As addressed in previous chapters, over the last three decades, increasingly disproportionate self-oriented

priorities have displaced a significant proportion of civic participation than existed in past generations. Additionally, the effort necessary for an individual to become adequately informed and to actively participate in the governance process has become a greater burden. Consequently, the process of sufficiently thinking through and analyzing social, economic, and political issues of the day and arriving at thoughtful decisions has, to a great extent, become impracticable, as time becomes a more precious commodity. Such serious matters are all too often relegated to quick, emotional, selforiented, and uneducated responses (i.e., “the biases of intuition” and kneejerk reactions). As a result, the lack of slower, more deliberate, in-depth, and logical thought processes and the inherent difficulties in utilizing a massive overload of conflicting, complex information and data have contributed to an indifferent public attitude toward the governance process. One may attribute this situation to a lack of self-discipline, a failed governing system, unwise behavior, and the indifference of a confused citizenry. On the other hand, American society has become a more intricate, perplexing, stressful, and competitive social order, the totality of which begins to exceed the human coping capabilities of a large segment of the population. Such extreme and time-limiting constraints lead to rash, off-the-cuff judgments, in contrast to carefully thought out and analytical assessments of identified variables related to a particular issue, opportunity, or decision. Hence, over time, a lack of interest, time, thinking, and knowledge leads to mediocre discussion, debate, and judgments, extending beyond politics and economics to personal and family matters. Daniel Kahneman provides a perspective of the mental processes of human thinking, judgments, and decision-making in his 2011 book entitled Thinking, Fast and Slow . ¹⁰ He envisions the human thought process metaphorically as a combination of System 1 (fast, intuitive and emotional) and System 2 (slower, more deliberate, in-depth, and logical). If an individual’s fast thinking System 1 mental capabilities fail to arrive at a quick, intuitive response to a given stimulus, the mind automatically engages the slower, more reflective, and forceful System 2 component of perception and memory. Thus, the combined efforts of the intuitive and deliberate thought processes are brought to bear to solve a problem by undertaking analytical thoughts, arriving at a judgment, and formulating an important decision to act. Kahneman illustrates the differences between the two divisions of thought processes, System 1 and System 2, by offering the simple math problem of 2 × 7, in contrast to the more complex 13 × 24. The former problem produces a quick, automatic response, while the latter requires a more thoughtful calculation using paper and a pencil. He views human systemic errors as biases of intuition , which form distinctive patterns of individual behavior that are repeated under similar circumstances. Such human errors that are routinely committed by people are attributed to “the design of the machinery of cognition rather than to the corruption of thought by emotion.” ¹¹ Thus, the repeated exposure to specific verbal and visual messages becomes ingrained in the human mind in an analogous fashion of 2 × 7 = 14 becoming cemented in the mind of an elementary school student.

In a similar way, today’s adult population is continually exposed to a blizzard of misleading and false political, economic, and consumer information, which unfortunately become embedded in one’s mind as truth and reality. Thus, questionable data, originating from political ads or from a cable network dedicated to an extreme political philosophy, may become a fountain of misinformation. In this manner, Mother Nature’s design of the machinery of human cognition provides the foundation for the success of overburdening political ads, modern corporate marketing strategies, and the scripting of so-called news by network entertainers masquerading as journalists. Kahneman comments: People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media. Frequently mentioned topics populate the mind even as others slip away from awareness. In turn, what the media choose to report corresponds to their view of what is currently on the public’s mind. It is no accident that authoritarian regimes exert substantial pressure on independent media. ¹² The broad appeal of heuristics and biases has been extended beyond psychology. That is, the expansion of experience-based techniques for problem solving, learning, and discovery, as well as the biases of intuition and errors, has provided an enhanced political and corporate toolbox for manipulating the human machinery of cognition. Consequently, there is a flood of misleading and false advertisements heard and seen at election time by citizens who don’t have the time, interest, or ability to seriously engage their minds in seeking truth and formulating their own judgments; these people are easy prey for deceptive political messages. The degree of success of this strategy is evident by the massive dollar volume of media expenditures during the long election season. The two presidential candidates reportedly spent about half a billion dollars each on TV advertisements during the 2012 election. Consequently, a sizeable proportion of the American population has become politically mesmerized by the abundance of repetitive, mindless, misleading media messages and has simply joined one of two political teams. In Chicago, if you like baseball, you are either a Cubs fan or a White Sox fan; take your choice. In politics, the mental path of least effort thoughtlessly accepts what is most appealing to your biases; you intuitively accept what the party leadership, other team members, and partisan pundits tell you constitutes loyalty, truth, and wisdom. The same strategy has been equally successful in consumer economics, as the proliferation of print, radio, and TV advertising produces intuitive responses that inspire consumer wants and needs, which are associated with the nation’s addictive behavior of conspicuous consumption and record credit card indebtedness. More is never enough. Kahneman provides insights into the overreliance on intuitive thinking by citing the work of psychologist Paul Slovic, who defines an affect heuristic as when “people let their likes and dislikes determine their beliefs about the world. Your political preferences determine the arguments that you find

compelling.” ¹³ An individual’s emotional attitude and biases (System 1) create judgments and decisions, as System 2 becomes “an endorser rather than an enforcer” of intuitive judgments. Accordingly, Senate Republicans, preparing for the 2010 elections, searched for a version of “truth” that would support their political preference to not believe in global warming. ¹³ Again citing the work of Slovic, Kahneman notes that “peculiarities of human judgment of risk” are “guided by emotion rather than by reason, easily swayed by trivial details, and inadequately sensitive to differences between low and negligibly low probabilities.” ¹⁴ Importantly, System 1 is incapable of statistical thinking . We easily think associatively, we think metaphorically, we think causally, but statistics requires thinking about many things at once, which is something that System 1 is not designed to do. ¹⁵ A deficiency of statistical thinking results in more intuitive responses with less dependence on a knowledge base and the intellectual power of System 2, resulting in quick judgmental decisions rather than outcomes that would benefit from System 2 cognitive capabilities. As a society’s organizational structures and functional processes become more challenging, complex, and stressful, the danger exists that an increasingly large portion of the population will rely on faulty System 1 mental processing (i.e., “guided by emotion rather than by reason”). This highlights the significant differences in thought process mechanisms of professional judgments by economists versus those of the general public. Additionally, it provides a rationale for the observation that twenty-firstcentury thinking of many Americans is intuitive; they choose to disbelieve climate change, evolution, and the need for environmental and financial regulations. If they are confronted by new thinking that contradicts an accepted and comforting social norm, ideology, or business strategy, it is deemed false and associated with some demonic conspiracy by a foe on whatever grounds. As a consequence of the 2012 presidential election results, a number of states formally petitioned the federal government to secede from the nation. Ironically, many of the states (e.g., Texas) receive more federal money than tax money they send to Washington. One wonders how these states would be financial viable if they seceded. From 1980 to 2009, New York State residents paid $950 billion in federal taxes, which were distributed to other states, such as Kentucky, Texas, Alabama, West Virginia, and Arkansas. Richard Thaler, a University of Chicago economist, and Cass Sunstein, a Harvard law professor, separate society’s membership into Econs and Humans. Humans are considered less consistent and less logical thinkers than Econs; they possess less economic information, avoid statistical thinking, and relying more heavily on intuitive thinking than Econs. Econs rely heavily on economic theories; advanced math, probability, and statistics; and rigorous computing techniques, as they attempt to accurately forecast economic trends and financial benefits. ¹⁶ Econs and decision theorists strictly follow utility theory , the rule of the rational human being, whereby rationality of the mind should prescribe

decisions, referred to as decision utilities. Is the decision internally consistent? “Rational agents are expected to know their tastes, both present and future, and they are supposed to make good decisions that will maximize these interests.” ¹⁷ Whereas for Humans, “rational” has the everyday meaning of using reasoning skills for a careful consideration of the issue, opportunity, or problem. Is the decision reasonable? “Humans are not well described by the rational-agent model.” ¹⁸ Kahneman refers to human outcomes as experienced utility . For the express purposes of economists and decision theorists, he adopts the term decision utility . ¹⁶ Psychologists are interested in intuitive choice, while economists concentrate on rational or advantageous choice; the former is related to the psychological value or desirability of money, referred to as utility of wealth, and supposedly responsible for a person’s degree of happiness. It should be noted that if decision utility is not fully harmonious with experienced utility, the decision might have entailed a degree of faulty thinking and could be incorrect. “Decisions that do not produce the best possible experience and erroneous forecasts of future feelings—both are bad news for believers in the rationality of choice.” ¹⁹ Jeremy Bentham, in the Principles of Morals and Legislation, states, “Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as determine what we shall do.” ²⁰ The System 1 cognitive mechanism relies on associative memory , which continually, unconsciously, and automatically assesses the individual’s environment for the possibility of being afflicted by pain or experiencing pleasure and is followed by an appropriate intuitive response. Our thought processes heavily rely on intuition and bias, favoring the status quo, which tends to produce shortsighted and unsatisfactory outcomes and errors. Appropriate to such thinking, the current tendency in America for those in business is to dismiss the manmade causes of global warming and to believe that lower taxes stimulate economic growth and government regulation interferes with the invisible hand of free market economic prosperity. That is, mentally create and believe in the pathway that produces your desired pleasure. But the resulting stagnant economy, widening income inequality, lack of educational achievement, and inadequate public social services assign pain to the less fortunate, but this is easily rationalized by the assigners of pain. Identifying Variables of Truth: Relationships to Cultural Dynamics

The nature, rate, and achievements of a social order’s development involve the integration of the culture’s organizational and functional components, with the extent of success or failure over time being dependent on available wealth, energy, and human resources and on attributes of human behavior and leadership skills. Searching for an understanding of cultural dynamics may involve two fundamentally different methodologies, which differ in the nature of human inquiry and which were introduced chapter VI. Generally, maximizing the search for truth and knowledge via the scientific method should utilize both approaches. First, in the pursuit of knowledge from seemingly unrelated fragments of societal disorder and complexity, the logico-meaningful methodology is capable of promoting a visualization of systemic orderliness and functionality, thus facilitating a greater sense of meaning, logical coalescence, and internally consistent interrelationships among the variables of cultural dynamics, leading to further knowledge. Outcomes are able to identify homogeneous functional and organizational relationships and crucial insights into cultural transitions. Thus, this methodology follows a logically meaningful ordering and mentally integrating process that requires the human mind to identify and logically connect cultural fragments that may have no obvious causal or functional connections. ²¹ Sorokin offers this analogy: “The properly trained mind apprehends, feels, perceives, senses, and understands the supreme unity of… the geometry of perfect mathematical deduction… a suite or concerto by Bach; of a Shakespeare drama… without any experimental or statistical manipulations and without indirect reasoning.” ²² To appreciate the intrinsic utility and power of the logico-meaningful methodology of the human thought process, compare it with the causalfunctional approach . In the seventeenth century, Robert Boyle discovered by experimentation that for a given quantity of a confined gas at constant temperature T, the product of its pressure P and its volume V was a constant quantity. In this manner, Boyle’s Law for the compressibility of ideal gases at a fixed temperature (P × V = a constant) was realized. A relationship among the variables of pressure, volume, and temperature was empirically identified by experimentation, but no knowledge or insights into the internal nature of the system were revealed (i.e., the nature of molecular dynamics). An understanding of the basic nature of this compressibility relationship (i.e., logical meaning and truth and knowledge) would eventually be obtained, but only through the application of indirect reasoning, human imagination, and additional creative experimentation represented by the scientific method. Boyle’s causal-functional methodology is in sharp contrast with Sorokin’s logico-meaningful thought process of ordering, comprehending, and integrating the words of a poem or the observed properties of a social order. A meaningful understanding of a poem requires the reader to utilize a mental process that creates logical interrelationships among the collection of words and to establish ideas, concepts, and a seamless unity of thought and meaning. Each reader “apprehends, feels, perceives, senses, and understands the supreme unity” of the poet’s words and may arrive at a

different interpretation. Thus, the logico-meaningful approach provides a mutually reinforcing, elaborate, and convincing methodology than attained from a causal-functional analysis. Applied to an all-inclusive system of a social order, such as a political or economic system, involves an infinite number of diverse and highly complex subsystems and cultural fragments, analogous to a poem. The mission becomes the search for, and the identification of, a common denominator or meaningful (but perhaps obscure) linkages. Logical and meaningful linkages serve to unify multiple cultural fragments by suggesting a significant, common cultural theme (e.g., a set of similar cultural values, consistent with a particular type of human behavior). However, such linkages do not necessarily constitute a causal connection. Consequently, this methodology is capable of creating a higher order awareness and appreciation of the fundamental character of a culture: “the central principle which permeates all the components, gives sense and significance to each of them, and in this way makes cosmos of a chaos of unintegrated fragments.” ²³ Note that the specific meaning or the “central principle” and “sense and significance” of an individual’s (or a social order’s) “accepted truth” are defined by the sources of truth, thinking, and knowledge (i.e., what “appears to be true”). Consequently, over the centuries and millennia, there have been unpredictable outcomes from the cultural integration of social, economic, and political systems as a consequence of fluctuating socio-cultural variables and manifestations of particular versions of truth adopted and utilized during a given era. This methodology seems capable of providing insights into the most desired approaches to be followed in arriving at a sound economic and political understanding of complex phenomena created by humankind and nature. Defining Truth and Wisdom as Influenced by Adopted Values The nature of truth and knowledge is defined by prevailing philosophies and values, which are instrumental in shaping the evolution of a culture traveling through the genesis, growth, and stagnation stages of development. This is the hypothesis for Sorokin’s three “main integrated forms of cultural Supersystems”: Ideational (truth of faith), Sensate (truth of the senses), and Idealistic (a mixture of faith and senses). ²⁴ Given these definitions and relationships, Sorokin’s investigations center on identifying philosophical currents of thought as revealed by art, music, literature, law, and the sciences. The identified philosophies, analyzed for common logical associations, are categorized in terms of their degree of Ideational, Sensate, or Idealistic mentality. If, for example, the data for a given era indicate a culturally dominant mentality of infallibility and superiority of faith over human reason, logic, and judgment, the conclusion is that the Ideational system of truth prevails. That is, the prevailing philosophical currents of thought would have logical and meaningful associations with the truth of faith, the ethic of principle, and the discipline of theology. Conversely, the Sensate system prevails if the epistemological data reveal a dominant linkage to truth derived from the human senses, the

ethics of happiness, and the discipline of science; the senses of the mind are predominantly the judge of truths as well as falsehoods. Accordingly, Sorokin’s objective is to identify dominant systems of truth utilizing philosophical trends of thought and knowledge in order to comprehend socio-cultural transitions. This initially requires gauging the relative influences of the philosophies of empiricism, religious and idealistic rationalism, mysticism, skepticism, and fideism as expressed by the “leading thinkers in the field.” Second, these primary variables of philosophical thought (i.e., identified “cultural fragments”) are then logically, systematically, and meaningfully linked to their sources, principles, and disciplines of truth, as in a jigsaw puzzle. These associations or linkages (i.e., sources, principles, and disciplines) are (1) truth of faith—ethics of principle—discipline of theology; (2) truth of senses—ethics of happiness— discipline of science; and (3) a mixture, in some proportion, of the truths of faith and the human senses. ²⁵ Consequently, a dominant system of truth is thereby characterized as a prevailing mixture of the truth of faith (religious or magical) and the truth of human senses (reason and logic). The Ideational system is based on the assumed infallibility and superiority of faith over human reason, logic, and judgment. Sacred scripture authenticates the truth of faith, represented by the discipline of theology. As such, the system becomes the “truth of God,” a supersensory, super-rational, and spiritually based guidance system providing divine inspiration for individuals to assess what is true, false, real, and acceptable. Logical reasoning, the discipline of science, and the scientific method may have minor influences on what is determined to be “truth,” but only if it does not contradict scripture. Accordingly, mysticism, rationalism, idealism, and eternalism constitute the faith-based philosophical foundation intended to influence all acceptable truth, knowledge, and behavior and to sustain the ethic of absolute principles. In contrast, empiricism reflects the Sensate system of truth, which assumes that the senses can be the only judge of truth as well as of falsehood. A middle ground, the Idealistic system of truth, harmoniously blends various degrees of faith, reason, and the senses. Western Civilization’s Six Philosophical Currents of Thought Sorokin identified the trends of six philosophical currents of thinking by categorizing their relative influences within the three systems of truth during the Greco-Roman and Western civilizations (580 BC to AD 1920). This initial phase of study then permits speculation as to the factors and variables responsible for humankind’s historical pattern of cultural growth, stagnation, and decline. These philosophical currents of thought are defined as follows: ²⁶ 1. Empiricism, the influence of thought and knowledge based on observation and experience , attains high levels during periods of socioeconomic expansions and low points during contractions. High points occurred from about 500 BC to AD 500 (Greek and Roman civilizations) and from 1100 into the twentieth century (Western civilization). The truth of senses is primarily derived from the disciplines of philosophy

and the sciences, which is a major influence within the current American culture. 2. Religious or Ideational rationalism is an extreme form of the truth of faith, whereas Idealistic rationalism expresses the combined influences derived from the disciplines of theology, philosophy, and the sciences. This mixed system represents a harmonious synthesis of all three truths but is dominated by independent thought, or intellectualistic idealism . Its zenith period was the medieval scholastics of the twelfth to the fourteenth century. Since 500 BC, rationalism has been a relatively strong cultural influence but has continually declined since the fifteenth century and is mainly absent from twenty-first-century America. 3. Mysticism, an extreme form of the truth of faith , is characterized as mysticism of despair and anti-rationalism . Since AD 100, except for the ninth century, mysticism has been a relatively strong influence but has experienced a steady decline since the fifteenth century. 4. Fideism, like mysticism, is considered an esoteric and desperate form of the truth of faith but is also associated with skepticism. Fideism was a substantial influence from the third century BC through the third century AD, but it became a small but continual influence from the fourteenth century through the twentieth century. 5. Skepticism is a negative, cynical, and passive voice of the truth of senses , doubting the very existence of valid knowledge. It was a moderate influence during the period from the fourth century BC to AD 300, and then it remained almost nonexistent until re-emerging in the fourteenth century and continuing as a slight influence through the twentieth century. This is appropriate to the current anti-science, antiintellectualism thrust in the United States 6. Criticism is a critical philosophy that approximates empiricism but also embraces skepticism and rationalism. In the eighteenth century, criticism appeared for the first time as a measurable relative cultural influence and continued to expand into the twentieth century. Currently, this is abundantly evident in the American culture. By their very nature, desperate, passive, or cynical philosophical forms of thought cannot be a component of an internally integrated cultural mentality. For example, skepticism requires one to be incapable of believing in any system of truth. Sorokin’s investigative methodology assumes that productivity of the scientific, artistic, and literary communities reflects the social order’s established philosophical currents between the extremes of deeply altruistic spiritualism and self-serving materialism. Major socio-economic transitions correspond to modifications of a population’s ethics, values, attitudes, and behavior, which stimulate cultural modifications and development. A. L. Kroeber (1876-1960) also defines cultural mentalities and transitions based on a society’s philosophical and aesthetic characteristics, using excellence and capacity of the sciences, the arts, and literature as

qualitative measures of societal success and prosperity. His methodology views a culture as reflecting its intellectual, emotional, and artistic soul as expressed by the quality and quantity of its fine arts, theater, philosophy, music, and literature. The logic of Kroeber’s methodology for qualitatively and relatively charting the success or failure of a civilization is thus rooted in the assumption that a period of considerable creative, talented, and original productivity in the cultural arts also reflects a high point of that society, a civilization development of “high value.” High value is defined as possessing “qualities of human productions which normally appear in historic configurations thus limited and shaped.” ²⁷ Kroeber refers to culturally “abstract activities” that denote “high cultural developments” as the “flowering” or “fluorescence” of the arts. His objective is to identify the recognized but unexplained patterns in cultural growth configurations. Thus, the level of success (or florescence) of the cultural arts and sciences is assumed to be a measure of generalized societal prosperity and advancement. A “florescent growth” period or the “flowering of intellectuo-aesthetic culture” may range from a human lifetime to a thousand years. The duration of the Greek scientific “florescence” was five centuries, Italian music four, English literature two, German literature one, and Russian music and French painting less than one. ²⁸ In addition to human influences, fluctuations of cultural growth occur as the result of society’s continual introduction of new processes, materials, and environmental conditions and the modifications of long-standing practices and procedures. This view is consistent with Sorokin’s perspective of “a whole integrated culture as a constellation of many cultural subsystems changes and passes from one state to another… . Its subsystems—be they… social, political, and economic organizations—change because each of these is a going concern, and bears in itself the reason of its change.” ²⁹ These include human values, ethics, and integrity, which guide a society as it generates consequences. Accordingly, changing variables continually disrupt a system’s search for dynamic cultural equilibrium by redefining the nature of the system and altering the controlling conditions, which produce irregular patterns of cultural growth, described by Kroeber as “lulls,” “pulses,” and “regressions.” Thus, cycles of socio-economic growth, stagnation, and degradation observed during the last 2,500 years, all consistent with Kroeber’s concept of “pulses” and “lulls” and with Sorokin’s fluctuations of epistemological currents of thought, are associated with systems of truth. As such, both authors address discontinuities in the progression of Greco-Roman Western civilizations as reflected by a social order’s prevailing cultural mentality. However, based solely on this behavioral methodology, they are unable to identify a specific model to adequately explain the observed long-term sequential periodicity in cultural productivity and the ultimate collapse of all civilizations. This goal requires analysis based on a broader perspective of interrelated cultural variables and factors. These include a society’s available wealth, energy, and human resources; continuous advancements in knowledge, technological innovations, equipment, and tools; and maintaining a positive work ethic, creativity, and social conscience. These

parameters control the rate and extent of socio-economic success and the continually shifting dynamic cultural equilibrium between the extremes of fear for survival and greedy materialism, between religious rationalism and empiricism, and between the truth of faith and truth dependent on the human senses. They also correspond to the fundamentals responsible for socio-cultural transitions and the sequential cultural transformations from ancient Greece to Rome to twenty-first-century America. Sorokin summarizes: Any cognition begins with the sensory perception (as with Aristotle) but to become knowledge and truth   .   .   . as sensory data are, so to speak, transformed by the intellect, which has a power to render a material object immaterial, and especially by the active intellect which brings out the universal or the intelligible in the object being perceived. ³⁰ Cultural Roots of American Society’s Philosophical Basis of Truth What does (or should) this evolving view of Greco-Roman Western civilization convey? First, since about the fifteenth century, faith, reason, and rationalism had lost their enormous historic cultural influence, displaced by the persuasion of direct observation and experiences that utilize the human senses. This translates into a societal loss of altruism and spirituality at the expense of more intense self-serving priorities and irrational behavior. Consequently, in over five centuries, the dynamic equilibrium of dominant philosophical thinking has dramatically shifted from idealism toward materialism, and the ethic of principle has been supplanted by the ethic of happiness. Will Durant comments: Idealism offends the senses, materialism offends the soul; the one explains everything but the world, the other everything but life. ³¹ By the twentieth century, Western civilization has become “the greatest Sensate culture the world has ever known… . It has been less and less an age of the co-operation of science, religion, and philosophy than an age of their warfare—explicit and implicit.” ³² Second, in the twenty-first century, the Western philosophical sense of truth is overwhelmingly dominated by the most intense sensate value system recorded in 2,500 years of human history. Specifically, the culture is dominated by the philosophical currents of empiricism, criticism, and skepticism, which are defined as the moral and psycho-social excesses of greed, egotism, incivility, and ruthlessness. This adequately describes America’s current cultural profile, exemplified by major corporations; politicians; the professions of law, medicine, and accounting; financial institutions; and a large segment of citizens who would deny health care, food, and shelter to those who need it, despite the nation’s historic wealth, simply based on the myth that such programs are unaffordable. The history of the fluctuations of Greco-Roman Western philosophical currents of thinking is that “primordial values as truth and knowledge, so far

as their content, criteria, and evidence are concerned, in socio-cultural actuality depend greatly upon the type of culture of which they are a part.” ³³ Chapter XI Comprehending America’s Cultural Dysfunctio n: The Science of Complex Systems and Chaos Theory Too large a proportion of recent “mathematical” economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols. ¹ John Maynard Keynes To a considerable extent, America’s cumulative and progressively paralyzing cultural dysfunction of the last half century is a consequence of a continuous exponential increase in the complexity of an expanding matrix of interdependent social, economic, and political systems, an inherent byproduct of rapid cultural maturation. Accordingly, human physical, emotional, and cognitive burdens, as well as financial commitments associated with the role of the world’s pre-eminent military and economic power, have become overwhelming, testing the limits of human endurance. America is struggling with the difficult task of managing an accelerating rate of cultural complexity, the magnitude of which is unprecedented in the annals of human history. Escalating human competition to survive and excel has intensified an infectious degradation of human values, ethics, and behavior, systemically contributing to the nation’s current self-destructive pathway. As A. L. Kroeber reminds us, social orders undergo “fluctuations of cultural vigor” and “with successful development… become exhausted.” From ancient Greece and Rome to the British empire, history provides vivid illustrations that the human capability to effectively manage the inherent exponential increase of societal complexity has its limits, at which point poorly managed disorder and dysfunction can lead to uncontrollable chaos. Importantly, the intrinsic meaning of complex in this discussion is defined by the science of complex systems, which differs substantially and extends beyond the usual connotation of being an intricate, mystifying, or difficult concept to comprehend. That is, its usage should not be confused with a challenge such as struggling to master the newest wireless communication device.

The science of complex systems is required for tackling broad-based concepts, mechanisms, and outcomes of the most fundamental, large-scale phenomena of nature and of human creation. This includes comprehending the dynamics of such emergent, unpredictable, and uncontrollable processes as biological evolution, earthquakes, hurricanes, the collapse of ecological systems, the global economy, and the growth and collapse of civilizations. The nature, dynamics, and outcomes of America’s four-hundred-year history also represent an illustration of complexity and the unpredictability of social orders. The theory of probability is the only mathematical tool available to help map the unknown and the uncontrollable. It is fortunate that this tool, while tricky, is extraordinarily powerful and convenient. ² Benoit Mandelbrot The cumulative and challenging disorder and dysfunction of twenty-firstcentury America are inherent consequences of its historic successes as well as its failures, as symbolized by unprecedented corporate profits, political corruption, governmental ineffectiveness, and economically based environmental disasters. America increasingly suffers a higher rate of major failures of its aging cultural systems, as the result of its operational functions becoming more massive, multifaceted, fragile, and disorderly, thus producing a larger number of unpredictable, undesirable major events. Meanwhile, vital system maintenance, repair, and replacement is more complex, expensive, time consuming, and politically difficult to implement, as those who have historically benefited from defective systems protect the status quo. The nation’s lack of success in providing emergency (and long-term) assistance to the victims of Hurricane Katrina, in preventing illegal immigration, and in effectively overseeing the consumer interests of financial institutions demonstrates society’s inability to control complex phenomena, as well as effectively manage them. The intricacies of Wall Street’s financial engineering and creative investment products continue to be incomprehensible, even for investors and government regulators. The financial sector has now assumed a global life of its own, producing unpredictable and more frequent worldwide financial crises, chaotic markets, and recessionary economies, which have become more massive with greater and more widespread ramifications. The Gulf of Mexico’s oilrig explosion and subsequent environmental disaster illustrate the inherent risks of the modern necessity to drill for oil miles below the ocean floor, relative to more accessible and less costly drilling of past generations. Such incremental expansions of system complexity and associated risk increase the probability of unpredictable, catastrophic events. In an analogous fashion, humankind is unable to control geological fault lines, which continuously undergo relatively small, local stresses and strains that transmit forces, capable of weakening and ultimately dislocating large geological layers and precipitating massive earthquakes.

Correspondingly, as societies mature and their social, economic, and political systems become more convoluted, bureaucratic, and interdependent, the probability of negative consequences increases proportionally to the increasing number of societal processes undertaken. Consequently, the probability of an event somewhere, ranging from inconsequential to catastrophic, increases with time. As a precaution, certain large vital systems require built-in redundancies to protect against complex system failure, which entail further systems development, complexity, and expense. The Nature and Complexity of Societal Functional Systems The Great Recession and its continuing global ramifications have been recognized as a major indicator of Western civilization’s severe socioeconomic and political degradation. Appropriately, economists continue to conduct postmortems, which are intended to perfect economic models and policies so as to avoid excessive national debt and future financial recessions. Meanwhile, some politicians grapple with potential legislative remedies for such economic downturns, while others attempt to block attempts to hinder unfettered corporate activity. Nevertheless, in order to conceptually comprehend the full mechanistic nature of economic activity and, more specifically, human attempts to control or manage a mature social order, one must treat such catastrophic events as the Great Recession according to the science of complex systems, which has been applied to earthquakes and severe atmospheric disturbances. Benoit Mandelbrot, the mathematician whose fractal geometry mirrors the full complexity of nature, notes that financial aspects of economic fluctuations generally follow only “mild randomness” (i.e., small-scale order within system irregularities and disorder). Investors and financiers plan for, but misunderstand, mild randomness as they attempt to learn from averages while overlooking outliers, thus ignoring catastrophic risk. Mandelbrot notes: When the weather changes, nobody believes the laws of physics have changed. Similarly, I don’t believe that when the stock market goes into terrible gyrations its rules have changed. ² Essentially, economic models are created based upon the utilization of historical data, intellect, and intuition in order to render future predictions of the unpredictable. Thus, in economics, catastrophic risk, which inherently exists among outcomes from processes of nature and those created by humankind, are generally avoided as potential outcomes. Thus, the relatively low risks of the most disastrous outcomes are severely underestimated (or completely ignored). In actuality, fully comprehending and predicting catastrophic economic occurrences such as the Great Recession is analogous to predicting the severity of earthquakes or where lightning will strike. It is known that earthquakes occur rather frequently in California but not precisely when, where, and to what severity. Of the almost infinite number of small, random geological events responsible for an earthquake, the one that will actually trigger the catastrophic event is also unpredictable. Thus it is useful to

explore the mechanistic similarities, as interpreted by the science of complex systems, between a society’s functioning economic system and Mother Nature’s geological system, both of which are capable of producing random cataclysmic events. The science of complex systems defines such an economic or geological system according to the five elements of diverse and robust components, which are interdependent , interconnected , and adaptable . An unpredictable earthquake occurs at some specific location, resulting from many diverse types of relatively small but robust geological dislocations. These random failures , occurring at distant points over a long time period, may be somewhat interdependent of each other in the short term but may ultimately become interconnected along a fault line in the long term. This large fault system continually adapts to small local random failures according to the principles of physics until experiencing a strategic failure or tipping point , which suddenly and unpredictably produces the catastrophic event. As with an earthquake, it is possible, after the fact, to identify a specific number of independent random occurrences contributing to the Great Recession. From the aftereffects, the unpredictable nature and consequences associated with complex socio-economic and political factors and the inherent limitations of human management become evident. However, the next earthquake or major recession will possess a differing, unique series of events from the last ones. America’s economic, political, and social systems, each comprising a limitless number of subsystems and processes; hundreds of millions of human participants; and endless laws, codes, and rules, constitute a scientifically classified complex system. For illustrative purposes, one may represent, as opposed to fully and formally defining, the diverse and robust components of America’s complex functional systems in terms of major processes, institutions, corporations, and leaders, always adaptable to new methodologies and tactics. These diverse and robust components may exhibit an inherent, but often unplanned and unrecognized , interconnectiveness and interdependence. Outcomes may be fluctuating periods of economic growth and weakness, or a sudden strategic failure or tipping point, as exemplified by Wall Street’s financial collapse. Importantly, complex systems are subject to the mathematics of randomness and thereby produce unpredictable system outcomes and rare events (or outliers ), and may never be fully controlled, only partially managed. During the last half century, the interdependence and interconnectiveness of seemingly unrelated key political actions; corporate networking devoted to collaborative political outcomes; and advanced technologies, information systems, and mathematical modeling enabled the creation of corporate financial strategies, whose complexity, sophistication, and potential consequences were beyond the comprehension of the best minds of investors and government monitors. Unlimited corporate resources enabled an effective system of robust and ethically malleable corporate and political processes, objectives, and persons to ultimately dominate and corrupt government fiscal policy, regulation, and legislation. All were contributing

factors to a catastrophic global financial and economic outlier, the Great Recession. Human limitations in managing increasing complexity and a corresponding, accumulating higher degree of societal disorder reached a strategic failure or tipping point, and there was a sudden transition to uncontrollable disorder and a chaotic global financial system (a bad storm became a hurricane). Functional processes of convoluted, seemingly disparate economic and political events, interpreted as vaguely interdependent and interconnected, ultimately became major contributors to an unpredictable, cataclysmic occurrence. A variety of legislative actions, specified in previous chapters, established a legal framework and political environment whereby the corporate sector was able to employ ingenious strategies to enhance profits. Accordingly, corporate-political alliances successfully promoted the repeal or watering down of key legislative provisions that governed business practices and fiscal policies, which enabled Wall Street firms to carry out such consumer scams as the sub-prime home mortgage scandal. Once again, in the annals of human history, extreme complexity of socioeconomic and political systems provided an enabling, nontransparent shield for some to successfully employ fraud, corruption, and ruthlessness, which ultimately degraded the social order. Numerous initiatives associated with Big Money’s grand strategy led to the nation’s excessive, inequitable distribution of national wealth and the associated failing middle class economy, as well as the financial industry crisis, all of which contributed to creating the tipping point for a cascading set of economic dominos, leading to a global crisis. Nevertheless, culpability for such major societal failures was appropriately directed toward inadequate leadership, corrupt bureaucracies, greedy profiteers, and human errors and misconduct. While recognizing human shortcoming as a contributing factor, the inherent realities associated with society’s continuous proliferation of massive, highly sophisticated operational systems are generally ignored. The numerous and elaborate private sector and governmental processes, requirements, products, and services needed to sustain escalating human wants, desires, and opportunities expand exponentially, not linearly. Accordingly, flourishing societies require inherently higher levels of education and creativity; more public services; enhanced resources, financial strategies, and skills; a broad range of information systems and technologies; and more demanding coping skills. Unfortunately, over time this requirement for intellectual capabilities and skills, essential for meaningful participation and success in an increasingly competitive world, has gradually outpaced the work ethic, aptitudes, and education of an increasingly larger proportion of the population. Additionally, cognitive capabilities, personal and intellectual self-discipline, and character and values affect humankind’s struggles to successfully manage the variables of the social order that may reduce the probability of major crises such as the Great Recession.

While not fully controllable, the threat of economic recessions may be more effectively managed, so as to be less severe or to occur less frequently by appropriate wise, ethical decisions based on personal integrity and behavior intended to reduce known negative cultural factors, particularly by embracing altruistic human values. As a side note, the Eisenhower administration is credited with such dampening of minor recessionary periods as discussed in chapter IX. Arthur Burns, chairman of the Council of Economic Advisers, successfully minimized the extremes of economic fluctuations by selective government initiatives that utilized Keynesian economics. Such political initiatives would be impossible in Washington’s current negativity and ineffectiveness. An examination of the concepts of societal development reveals the nature of dynamic cultural forces, which mandate a continuous increase of cultural complexity, and which in turn create greater disorder and dysfunction. Fundamentally, social orders continuously struggle to survive and prosper, requiring the constant creation of more intricate, expensive, and successful organizational structures and operational functions in order to address the unremitting escalation of human opportunities, long-standing irresolvable issues, and the next generation of higher order problems, expectations, and threats. As a result, a society’s economic, social, and political systems, subject to continuously changing variables, require a continuous flow of additional resources, creativity, and initiative in order to maintain the momentum of economic growth and societal satisfaction. Thus, normal societal maturation inherently creates more expansive and numerous systems and subsystems of greater intricacy and orderliness, which ultimately challenge the limits of available wealth and energy resources as well as human physical, mental, and emotional tolerance. During the last hundred years of historic socio-economic advancement, these dynamics transformed American communication, transportation, manufacturing, and financial services industries and, out of necessity, expanded the responsibilities, number of agencies, and employment levels of government. Likewise, the realities of human existence and associated ramifications for the earth’s environment provided additional challenges from increasing societal complexity and environmental degradation. Thus, regulating societal progress and advancements as well as defective human behavior has resulted in unfathomable regulatory detail and complexity. Note that Dodd-Frank legislation, representing an attempt to manage the complexity of risk in modern banking, required an 848-page document. The reader is referred to the previous discussion in chapter III of Max Weber’s concept of rationalization and the inherent loss of societal integrity, efficiency, trust, and coherence as societies create large-scale, extreme levels of orderliness within a rational system of administering a modern society. The net result is the creation of additional major functional and organizational problems rather than increases in efficiency and effectiveness. The protracted journey of progressive cultural adaptation and maturation entails continuous cycles of re-creating, modifying, deleting, and expanding the existing array of interconnected and interdependent social, economic, and political systems, based on continuous positive and negative feedback

loops. The number, diversity, intricacy, and technical sophistication of these systems multiply exponentially with each loop, creating dramatic and unpredictable consequences. This is the nature of complex systems. The continuous creation and accumulation of innate societal complexity and disorder symbolizes inevitable outcomes from a social order’s ongoing struggle to maintain economic and social stability and to avoid cultural stagnation and chaos. The science of complex systems and chaos theory provides answers to why and how large entities such as corporations, government agencies, and civilizations, during their journeys to success or failure, also create stifling levels of disorder and dysfunction. The challenge for organizations and societies is to minimize the creation of such disorder and dysfunction by acquiring the necessary resources to create a sufficient counterbalancing level of orderliness and maintain economic growth and social stability. To this end, comprehending how to most efficiently manage complex systems by maximizing the creation of order, while minimizing inevitable disorder and dysfunction, is fundamental to success. As an illustration, recall San Francisco’s innovative project, SFpark, designed to reduce city traffic congestion and minimize urban disorder, driver stress, fuel consumption, and air pollution, as discussed in chapter III. Also, the auto industry, by designing more efficient car engines that minimize car exhaust and increase gas mileage, reduces undesirable molecular disorder in the environment and utilizes fuels via a more efficient and cost-effective process. The Elements and Science of Complex Systems The science of complex systems incorporates and integrates five fundamental elements. ³ The first is a diversity of identifiable components that constitute a particular system, such as an economic system, a political system, or a culture. Examples of diverse, interactive components or variables include a culture’s values, skills, philosophies, and behaviors and nature’s geological structures and biological species. A functioning system, by virtue of its interacting components, may contribute to or detract from successful outcomes and may undergo long-term modifications in an adaptive environment. Biological evolution and a nation’s economic system are examples of such adaptive systems. Second, a functioning complex system relies on interconnectiveness or connectivity among its diverse components (e.g., the interconnectiveness of people, ecological and biological subsystems, corporate structures, and the global banking network). Such connectivity may result from pure mathematical chance, self-associated cloistering, creations of man and nature, or unpredictable outcomes inherent to complex systems. Third, a complex system depends on the nature, degree, and quality of interdependence among its diverse components. Human interdependence may reflect attitudes and values ranging from altruism and compromise to ruthlessness and greedy materialism, thus creating a broad variation of human behavior affecting cultural outcomes. In nature, a more clearly defined set of processes and potential outcomes rely on the interdependence of the principles of physics, mathematics, chemistry, and biology; on the

availability of energy sources; and on probability. Consequently, the laws of nature are the basis for interdependency rules, which influence long-term adaptation of complex systems such as animal and plant evolution as well as short-term random outcomes. The synchronized, self-regulating organ systems of the human body serve as an illustration of an adaptive, cooperative, and structurally and functionally interdependent system that follow nature’s laws. Thus, complex systems may be visualized as interconnected networks of diverse components and subsystems that support interdependent relationships and maintain functional conditions that influence outcomes. Inherently, such systems are in a continuous state of flux, as components and conditions are continually being created, modified, and eliminated, with potential outcomes being represented as a distribution of potential events. For the long term, the dynamics of this functionality of diverse interdependency will stimulate additional diversity, innovation, and robustness, which also increases the system’s risk. A complex system, created by nature or by humans, usually survives the more probable random failures as a result of its robustness and ability to adapt, whereas the less probable strategic failures may result in a cataclysmic collapse of the system, due to an inability to adapt to macro events. Contrast the ability to adapt from a random broken arm versus a strategic heart attack. Fourth, complex systems possess the ability to adapt, a necessity for survival in an ever-changing environment for both animal species in the wild and human social orders. Nature’s biological systems adapt over time as an unplanned, spontaneous bottom-up phenomenon following interdependent rules of science. However, human creations of social, governmental, and corporate systems are managed from the top down following less precise, often irrational and self-serving strategies, tactics, and methodologies. Since complex systems are continually in a state of change, humanly created systems appropriately require nonstationary thinking ; that is, adaptive, evolving rules of interdependency capable of maximizing human influences and desired outcomes. However, this logic is contrary to modern economic practices of over-reliance on past models, strategies, and tactics that may or may not align with current socio-economic and political conditions that will represent tomorrow’s reality (i.e., stationary versus static thinking in a nonstationary, evolving world). Finally, complex systems are robust , as in their ability to withstand stress and trauma by adapting and thereby creating emergent processes , which produce novel events, outcomes, and patterns. Emergent processes, such as human evolution, represent numerous, diverse, and interdependent micro events undergoing spontaneous transitions and contributing to unpredictable macro outcomes. Such systems take on a life of their own; consequently, some may be successfully influenced or managed but never controlled. However, limits to a system’s robustness, and thus its ability to maintain functional stability, threaten its viability.

Accordingly, a system that accumulates a limiting systemic stress or disorder (i.e., a state of self-organized criticality), may suffer a cascading series of macro events. The appearance of such a tipping point represents a loss of system stability, a consequence of a gradual decline in its ability to maintain a necessary degree of functional and structural order. Think earthquakes. Accordingly, three decades of corporate manipulation of Washington politics and a national dogma that “greed is good for America” contributed to a state of self-organized criticality, a limiting systemic disorder within the global investment industry that abruptly and unpredictably created a tipping point, transforming Wall Street banking from a state of unmanageable disorder into chaos and collapse. Likewise, sudden geological system failures are the consequence of accumulating micro geological events taking place over a long period of time. Under increasing mechanical stress, geological structures may become unable to moderate or adapt at the micro level to an accumulating structural instability. Upon reaching a limiting systemic stress and criticality, a tipping point is reached, producing an earthquake. The same rationale applies to a heart attack from chronic coronary artery disease. The Origin and Mismanagement of Human Complex Systems In 2011, Middle East nations, subjected to generations of tyrannical leadership and massive unemployment, poverty, and despair, suddenly and unexpectedly underwent a wave of popular revolutions. An infectious people’s revolt, demanding freedom and opportunity, was touched off by a relatively insignificant event, which quickly spread from Tunisia to Egypt, Libya, and Bahrain. The self-immolation of a Tunisian street vendor, Mohamed Bouazizi, protesting the confiscation of his vegetable cart, is credited with triggering a popular uprising that spread through the Arab world. After hundreds of years of human abuse; the loss of respect, hope, and dignity; and failed socio-economic and political systems, a relatively inconsequential micro event produced a cascade of titanic macro events throughout the world, which will have unpredictable long-term outcomes. More generally, a complex system in a state of self-organized criticality, suffering from declining robustness and loss of some degree of adaptability due to increasing disorder and instability, has exceeded its ability to create some counterbalancing orderliness necessary to stabilize itself. The ultimate consequence is a sudden, unpredictable cascade of macro events. Theoretically, a system’s healthy degree of robustness lies within a potential dynamic equilibrium range between excessive order (i.e., approaching static equilibrium, devoid of an ability to change) and excessive disorder (i.e., approaching chaos, unable to adapt). ⁴ This limiting (although quantitatively ambiguous) dynamic equilibrium continuum represents a set of boundary conditions reflecting diverse and interdependent interactions, robustness, and adaptability, capable of successfully influencing and enhancing the propagation of emergent processes. This generality of complex systems may be applied to the history of General Motors. At one time in its history, the company functioned within a moderate

degree of orderliness between excessive order and randomness, avoiding the extremes of stasis and chaos, and achieved a healthy corporate robustness and adaptability. Over time, GM’s robust culture deteriorated due to an evolving, more highly competitive global market and its lackluster products, ineffective management, and chronic labor issues. The GM culture ultimately approached a tipping point into a chaotic system that lacked sufficient orderliness to function effectively and efficiently, culminating in corporate stagnation. In order to rejuvenate such a failed corporate system, its dynamic equilibrium had to be shifted toward decreasing uncontrollable randomness and excessive dysfunction by a reduction of disorderly elements. This objective required a rejuvenation of system robustness and adaptability, increasing orderliness and efficiency, and restoring adequate organizational and functional stability in order to achieve financial solvency. This goal necessitated rethinking corporate scope, mission, function, and structure and creating more appropriate strategies, products, and services. Such necessary corporate rejuvenation took place within General Motors when, in the midst of the Great Recession and GM’s imminent bankruptcy, the federal government provided quasi-loans to recapitalize the company only after forcing major changes in management, scope of products, and wage and pension policies. External forces, in the face of liquidation, required GM to radically increase it institutional orderliness and functionality, thereby reducing its historic dysfunction, disorder, and financial insolvency. There is an obvious parallel of GM’s micro history with America’s large-scale creeping cultural stagnation during the last half century, exemplified by the performances of Congress, major corporate institutions, and state governments. Major American governmental agencies and corporations exhibit typical characteristics of failing complex systems. Unmanageable bureaucracies engage in unproductive, costly activities, which are on the pathway to unpredictable, destructive outcomes within an increasingly irrational, uncivil, unethical, and materialistic cultural environment. In recent decades, the science of chaos has provided important insights into the dynamics of complex systems, including mechanisms whereby maturing social orders gradually suffer a loss of orderliness and stability, ultimately exhibiting chaotic behavior. Economic systems, as an example, may exhibit regularity and some degree of predictability in some aspects of their functionality for limited periods of time, while becoming unpredictable in the long term. Similarly, the interdependence of diverse components of a global economic system will simultaneously produce constructive and destructive outcomes, exhibiting unpredictable patterns of performance and outcomes. During the era of an economic system’s inception, certain eventual economic outcomes that eventually materialized would not only have been unpredictable but would have been unrecognizable, an improbable vision given initial parameters and conditions. Compare the nature and role of America’s financial services industry of 1950 with that of 2013. The Great Recession:

Mild Randomness of Economics Becomes Chaos An economic system, inherently possessing some degree of predictable and unpredictable outcomes, is referred to as being deterministic if it obeys the laws of science and mathematics. The flipping of a coin, based on mathematical probability, can yield only a head or a tail, with a single outcome having no influence on the next coin tossing outcome (i.e., a future outcome is not affected by past events). Hence, information of the past is not relevant to the task of predicting the exact sequence of heads and tails when flipping a coin one hundred times; thus, this type of outcome is deemed as unpredictable. Each flip is a new beginning for the defined sequential process and is independent of the outcomes of previous events. In contrast, biological evolution recognizes that a given generation may possess characteristics of previous generations, with some having been significantly modified over time. In such an emergent process , a future outcome is dependent on the present state, but recognizing that the present state was unpredictably influenced by the past. Thus, the initial state or starting point for a next generation of events is the present one, but the exact outcome is unpredictable. Emergent processes are the consequence of two primary factors. First, complex systems are extremely sensitive to exceedingly slight variations in system conditions, due to the exponential mathematical relationships of system variables. Second, complex systems consist of abundant potential processes and pathways, which in turn are affected by a large number of possible variables, some of which are unknown. Consequently, emergent processes inherently produce unpredictable events and outcomes. Small variations of variables of humanly designed systems, including changing environmental conditions, avoidable and unavoidable errors, imprecise measurements, and mathematical probability, contribute to the unpredictability of future events. The outcome of each event is the beginning state for the next event and its unpredictable outcome, as in the example of the sequence of outcomes from flipping a coin a hundred times. The variation of similar and dissimilar physical characteristics typically observed among a large number of children of one family illustrates the concept of an emergent process. In like fashion, a sequence of a few small independent but interdependent human and mechanical events of misjudgment and error led to the Gulf of Mexico oil rig disaster, creating a cascade of long-term social, emotional, ecological, economic, and cultural tragedies. A stable complex system suddenly became unstable, creating a surge of independent events, each having an existence of its own and each producing multiple diverse outcomes: a chain reaction.

Accordingly, a national economy in its genesis and early growth phases may initially function deterministically and with mild randomness and a high degree of predictably, which may ultimately reach a horizon of predictability . This represents the transition to a critical accumulation of extreme randomness and chaotic behavior. Thus, the pathway to chaotic behavior involves an abrupt transition from some degree of order and limited predictability to uncontrollable randomness (i.e., chaos). Consider the classic physics demonstration whereby two double pendulums begin their cycles at the same time and with the same arc displacement. After a few initial synchronized cycles, the two instruments suddenly exhibit independent, wild flips of the lower pendulums. Such chaotic conditions are the ultimate outcome of predictable and orderly behavior, initially obeying deterministic laws (in this case Newton’s laws) but ultimately becoming characteristically non-Newtonian and chaotic (i.e., unpredictable and random). Accordingly, complex systems embody both orderly and random behavior that will depend on the particular dynamics of the system at any particular time. The swinging double pendulum transitioning from order to chaos is representative of well-recognized major US social, financial, and economic system failures of recent years as well as weather or environmental disasters. As nations over time experience normal fluctuating cycles of success and failure, there may come a time when they reach a tipping point, a point of no return, and make the transition into irreversible, random, and chaotic behavior. Ancient Rome collapsed as a result of over three hundred years of gradual societal degradation, until collapsing at a time of high cultural disorder and dysfunction. The loss of cultural vitality and social, economic, and leadership capabilities were severe enough that the accumulating disorder became insurmountable. The extent of Rome’s loss of cultural adaptability and robustness was so severe as to prevent it from rebounding from accumulating random chaotic behavior, which gradually led to cultural collapse. An understanding of complex systems provides important insights into the frequent inquiry of why economists seldom agree with each other and are unable to anticipate sudden, significant economic downturns. There remains a broad variety of assessments as to whether the US $787 billion stimulus expenditure in 2009 was good, bad, or of no consequence in promoting economic growth. Some wish to consider such economic forecasting and post-event evaluations as a science. However, attempting to forecast detailed specific outcomes of such a large, multifaceted stimulus initiative remains elusive, subject to many unknown and undefinable variables and the laws of probability; thus, educated guesses may, to a limited degree, prove to be accurate. In nature, an animal’s complex circulatory system creates biological outcomes, which include the capable of spontaneously self-organizing, selfmanaging, and self-synchronizing its basic functions and being highly responsive to small perturbations acting upon the total organism. The

design of blood vessel subsystems is based on self-similar fractal architecture of branching networks, a highly creative structural blueprint that maximizes the efficiency of energy consumption. Functional patterns of the human circulatory system are represented as heart rhythms, which depict the heart’s self-regulating dynamics. Under certain circumstances, the circulatory system may suddenly become unstable; as a result, the heart rhythm deviates from its regular periodicity and may assume a chaotic pattern. At this point, the system spontaneously attempts to restore a more normal and stable rhythm. Success is survival, and failure is death. The inherent differences in the degree of perfection between nature’s complex systems of the animal and plant worlds and those created by humans obviously reside in the superior design capabilities of Mother Nature relative to our abundant imperfections. The behavioral aspects of four thousand years of human history may be described as an imperfect stewardship of the social order’s unpredictable complex systems of existence that unconditionally depend on nature’s processes and laws. Accordingly, the vast literature of civilization studies consists of abundant examples of successes and failures of social orders, as humans imperfectly contend with their self-imposed complex systems and with limitations imposed by nature, while continuously attempting to avoid excessive disorder, dysfunction, and chaos. The long history of failed civilizations continues, as America struggles with paralyzing dysfunction and Western civilization continues the tradition of progression through Arnold Toynbee’s sequence of cultural growth, breakdown, and degradation. Almost half a century ago, Pitirim Sorokin portrayed the escalating cultural degradation and dysfunction of Western civilization. He concluded that civilizations evolve to become decadent and self-destructive, ultimately evolving into a state of disintegration: The existing order has passed its creative phase and is on the verge of bankruptcy; that it spells bullets rather than bread, destruction rather than construction, misery rather than prosperity, regimentation rather than freedom, confusion rather than order, death rather than life. Its decline is not due to the murderous assaults of barbarians, revolutionaries, or plotters, but to its own senility, the exhaustion of its creative forces. ⁵ Nevertheless, Sorokin was unable to identify “spontaneous forces inherent in the system” of social orders or to provide a rationale for the repeating patterns of cultural growth and decay within Greco-Roman-Western civilizations during the last four thousand years of human history. More broadly, he and other eminent civilization studies authors have been unable to answer the fundamental question of why all known civilizations have ultimately collapsed. To better comprehend this tantalizing unknown, it will be necessary to understand human behavior within the context of modern scientific concepts of complex systems and chaos theory and the effective management of wealth and energy consumption that adheres to the principles of democracy. The science of chaos theory appears to tell us that a society’s vital functional mega systems, while maintaining an acceptable degree of stability but

suffering substantial cultural degradation, may unpredictably and suddenly be transformed into irreversible random events, propelling the social order into chaos and collapse. This is analogous to the human heart undergoing transitions from normally functioning to an irregular rhythm to death, as a result of one or more random, unpredictable systemic failures of the body, which possesses insufficient robustness and adaptability to overcome the challenging circumstances. For America, the question remains, given its current self-destructive cultural pathway and state of excessive complexity and dysfunction, will the nation be able to regain the necessary vitality, cultural and moral values, and discipline to avoid the continued accumulation of self-organized criticality and limiting systemic disorder, representing the tipping point of cascading dominos that ancient Rome was unable to avoid? A society does not ever die “from natural causes,” but always does from suicide or murder—and nearly always from the former.” Arnold J. Toynbee Notes Cover Much of the data appearing on the cover is from the work of Richard Wilkinson and Kate Pickett: The Spirit Level: Why Greater Equality Makes Societies Stronger (New York: Bloomsbury Press, 2010), chapters 1-2, 4-11. Data may also be found in the volume written by Jeffery Sachs: The Price of Civilization : Reawakening American Virtue and Prosperity (New York: Random House, 2011), pp. 221-225. The quote is from Will Durant: The Story of Civilization: Part II: The Life of Greece (New York: Simon & Schuster, 1954), pp. 268, 281, 659. Preface 1. Wilkinson and Pickett, The Spirit Level . 2. Sachs, The Price of Civilization . 3. Data from annual US Census Statistical Abstracts highlights the period from 1950 through 2009. 4. Dickens, Charles, Hard Times (New York: Harper & Brothers, 1854), p. 281. 5. Keynes, Maynard J., The End of Laissez-Faire (London: Hogarth Press, 1926), pp. 11, 40. The Narrative

America Is Self-destructing: Alfred Toynbee Had It Right 1. Toynbee, Arnold J. A Study of History , ab. Sommervell, D. C. (New York: Oxford University, 1957), I-VI: 273. 2. Ferguson, Niall, Civilization: The West and the Rest (New York: Penguin Press, 2011), p. xv. 3. Ibid., p. 308. 4. Belluck, Pam, “Medicaid Expansion May Lower Death Rates Study Says” (The New York Times , July 26, 2012). 5. Wilkinson and Pickett, The Spirit Level, p. 80. 6. Toynbee, A Study of History, XXIV: pp. 4-10. 7. Huntington, Samuel P., The Clash of Civilizations and the Remaking of World Order (New York: Simon & Schuster, 1996), p. 301. 8. Kroeber, A. L. Configurations of Culture Growth (Berkeley: University of California Press, 1944), p. 822. 9. Sorokin, Pitirim A. Social and Cultural Dynamics (New Brunswick, NJ: Transaction Publishers, 1991), p. 630. 10. Ibid., p. 633. 11. Durant, Will, The Story of Civilization: Part III: Caesar and Christ (New York: Simon & Schuster, 1944), p. 665. 12. Durant, The Story of Civilization: Part II: The Life of Greece, p. 470. 13. Quigley, Carroll, Tragedy & Hope: A History of the World in Our Time (New York: The Macmillan Company, 1966), pp. 3-5. 14. Rothkopf, David J., “Redefining What No. 1 Means” (The New York Times , October 9, 2011), p. 135. 15. Stiglitz, Joseph E. The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W. W. Norton. 2012), p. 120. 16. Ibid., p. xiii. 17. Ibid., p. xvii. 18. Data from annual U.S. Census Statistical Abstracts highlights the period from 1950 through 2009. 19. Duhigg, Charles, and David Kocieniewski, “How Apple Sidesteps Billions in Taxes” (The New York Times , April 29, 2011). 20. Kristof, Nicholas, “Our Fantasy Nation?” (The New York Times , June 4, 2011).

Meyerson, Harold, “Cut Off the Slake States” (The Washington Post 21. September 25, 2011 ). 22. Kristof, Nicholas, “Bonuses for Billionaires” (The New York Times , July 20, 2011). 23. Nocera, Joe, “Romney and the Forbes 400” (The New York Times , September 2, 2012). 24. Reich, Robert B., “The Limping Middle Class” (The New York Times , September 4, 2011). 25. Wilkinson and Pickett, The Spirit Level . 26. Sachs, The Price of Civilization . 27. Stiglitz, The Price of Inequality , p. 41. 28. Rothkopf, “Redefining What No. 1 Means.” 29. Thompson, Michael J., The Politics of Inequality (New York: Columbia University Press, 2007), pp. 45-48. 30. Blow, Charles M., “The Pirates of Capital Hill” (The New York Times , April 16, 2011). 31, Cohan, William D., Money and Power: How Goldman Sachs Came to Rule the World (New York: Doubleday, 2011), p. 11. 1. Ibid., pp. 15-16. 2. Rothkopf, David, The Epic Rivalry Between Big Business and Government and the Reckoning That Lies Ahead (New York: Farrar, Straus and Giroux, 2012), p. 6. 3. Porter, Eduardo, “Wall Street Protesters Hit the Bull’s Eye” (The New York Times , October 29, 2011). 4. Cohan, Money and Power , p. 18. 5. Andersen, Kurt, “The Downside of Liberty” (The New York Times , July 4, 2012). 6. Lewis, Michael, Boomerang: Travels in the New Third World (New York: W. W. Norton & Company, 2011), pp. xi-xii. 7. Sorokin, Social and Cultural Dynamics , p. 231. 8. Stiglitz, The Price of Inequality, p. 134. 9. Partisan Polarization Surges in Bush, Obama Years: Trends in American Values: 1987-2012 . Pew Research Center, 2012. 10. Friedman, Thomas L., “Can’t Keep a Bad Idea Down” (The New York Times , October 26, 2010).

Mann, Thomas E., and Norman J . Ornstein, It’s Even Worse Than It 11. Looks: How the American Constitutional System Collided with the New Politics of Extremism (New York: Basic Books, 2012), p. 26. 12. Ibid., pp. 17, 25. 13. Ibid., p. 190. Chapter I America’s Corrupt, Dysfunctional Society: Loss of Cultural Values, Ethics, and Integrity 1. Durant, The Story of Civilization: Part III: Caesar and Christ , pp. 665-666. 2. Ibid., p. 19. 3. Krugman, Paul, “Wisconsin Power Play” (The New York Times , February 20, 2011). 4. Krugman, Paul, “Banks Gone Wild” (The New York Times , October 23, 2007). 5. Kristof, Nicholas D., “Why Let the Rich Hoard All the Toys” (The New York Times , October 4, 2012). 6. Rothkopf, The Epic Rivalry, p. 316. 7. Lewis, Michael, Liar’s Poker (New York: W. W. Norton & Company, 1989), pp. 28-29. 8. Lowerey, Annie, and Robert Pear, “Doctor Shortage Likely to Worsen with Health Law” (The New York Times , July 28, 2012). 9. Putnam, Robert D., Bowling Alone: The Collapse of American Community (New York: Simon & Schuster Paperbacks, 2000), pp. 260-261. 10. Sedlack, Tomas, Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street (New York: Oxford University Press, 2011), pp. 218-219. 11. Koehn, Nancy F., “The Moral Behind All the Numbers” (The New York Times , July 2, 2011). 12. Everson, Mark, “Lawyers and Accountants Once Put Integrity First” (The New York Times , June 16, 2011). 13. Norris, Floyd, “Bad Grades Are Rising for Auditors” (The New York Times , April 4, 2012). Norris, Frank “Regulators Express Doubt About Auditor’s Procedures (The New York Times . March 8, 2013). 14. Cohan, Money and Power, p. 2.

Hacker, Jacob S., and Paul Pierson, Winner-Take-All Politics (New York: 15. Simon & Schuster, 2010), p. 249. 16. Rattner, Steven, “The Dangerous Notion That Debt Doesn’t Matter” (The New York Times , January 22, 2012). 17. Lewis, Michael, Boomerang (New York: W. W. Norton, 2011), p. 189. Lewis, Tamar, “Gap Widens for Faculty at Colleges, Report Finds” (The New York Times , April 8, 2013). 18. Frank, Robert H., The Darwin Economy (Princeton, NJ: Princeton University Press. 2011. 49. 19. Romer, Christina D., “The Rock and the Hard Place on the Deficit” (The New York Times , July 3, 2011). 20. Hacker and Pierson, Winner-Take-All Politics , p. 75. 21. Frank, Robert H., “Find the Taxes That Do Double Duty” (The New York Times, February 20, 2011). 22. Blow, Charles M., “The GOP’s Abandoned Babies” (The New York Times , February 26, 2011). 23. Kocieniewski, David, “Budget Cuts Hamper the IRS in Efforts to Collect Billions in Taxes, Report Says” (The New York Times , January 11, 2012). 24. Douthat, Ross Douthat, “The Method to Their Madness” (The New York Times , July 7, 2011). 25. Hacker and Pierson, Winner-Take-All Politics , p. 83. 26. Edsall, Byrne, The Age of Austerity: How Scarcity Will Remake American Politics (New York: Doubleday, 2011), p. 57. 27. Lessig, Lawrence, Republic, Lost: How Money Corrupts Congress—and A Plan to Stop It (New York: Hachette Book Group, 2011), p. 1. 28. Mann, Thomas E., and Norman J . Ornstein, It’s Even Worse Than It Looks: How the American Constitutional System Collided with the New Politics of Extremism (New York: Basic Books, 2012), p. 81. 29. Ibid., p. 85. 30. Ibid., p. x. 31. Edsall, The Age of Austerity , p. 59. 32. Ibid., p. 58. 33. Reich, Robert B., Beyond Outrage: What Has Gone Wrong with Our Economy and Our Democracy, and How to Fix It (New York: Vintage Books, 2012), p. 76.

Kleinke, J. D., “The Conservative Case for Obamacare” (The New York 34. Times , September 20, 2012). 35. Kolata, Gina, “Knotty Challenges in Health Care Costs” (The New York Times , February 6, 2012). 36. Brill, Steven, “Bitter Pill: How Outrageous Pricing and Egregious Profits Are Destroying Our Health Care” ( Time , March 4, 2013). 37. Belluck, Pam, “Medicaid Expansion May Lower Death Rates, Study Says” (The New York Times , July 26, 2012). 38. Krugman, Paul, The Conscience of a Liberal (New York: W. W. Norton & Company, 2007), pp. 11-12, 21. 39. Stiglitz, The Price of Inequality, p. 95. 40. Kolata, Gina, “First Study of Its Kind Shows Benefits of Providing Medical Insurance to Poor” (The New York Times , July 7, 2011). 41. Edsall, Thomas B., “Kill Bill” (The New York Times, May 22, 2013). 42. Brody, Jane E. “Avoiding Emergency Rooms (The New York Times , April 16, 2013). 43. Kaufman, Leslie, “Scientists Stress Urgency of Limiting Emissions” (The New York Times , May 12, 2011). 44. Lessig, Republic, Lost , p. 82. 45. Krugman, Paul, “Corporate Cash Con” (The New York Times , July 4, 2011). 46. Friedman, Thomas L., “The Copenhagen That Matters” (The New York Times , December 23, 2009). 47. Hacker and Pierson, Winner-Take-All Politics , p. 277. 48. Ibid., p. 74. 49. Douthat, Ross, “Washington Versus America” (The New York Times , August 23, 2012). 50. Lessig, Republic, Lost , p. 91. 51. Ibid., p. 108. 52. Reich, Robert B., Aftershock: The Next Economy and America’s Future ( New York: Alfred A. Knopf, 2010), p. 110. 53. Lessig, Republic, Lost, p. 100. 54. Ibid., p. 159. 55. Ibid., p. 152

Ibid., p. 199. 56. 57. Andersen, Kurt, “We, Robot” (The New York Times, August 12, 2012). 58. Grubel, James, “Australia’s Gun Controls a Political Template for the U.S.” ( Reuters, April 3, 2013). Chapter II Political and Economic Exploitation of the Middle Class: Demeaning the Principles of Social Justice and the Public Good 1. Hacker and Pierson, Winner-Take-All Politics , p. 87. 2. Pew Report: Partisan Polarization Surges in Bush Obama Years, Trends in American Values: 1987-2012, June 4, 2012. 3. Krugman, Paul, “Galt, Gold and God” (The New York Times , August 24, 2012). 4. Rand, Ayn, Atlas Shrugged (New York: Penguin Putnam, 1992), pp. 1170-1171. 5. Rand, Ayn, The Virtue of Selfishness: A New Concept of Egoism (New York: Signet Book, 1989), p. 3. 6. Krugman, Paul, “Free to Die” (The New York Times , September 16, 2011). 7. Dionne, E. J., Our Divided Political Heart (New York: Bloomsbury, 2012), p. 165. 8. Ibid., p. 23. 9. Ibid., p. 167. 10. Stiglitz, The Price of Inequality , p. 24. 11. Ibid., p. 8. 12. Reich, Beyond Outrage , p. xiv. 13. Rattner, Steven, “The Corporate Tax Dodge” ( The New York Times, May 24, 2013). Kocieniewski, David, “US Business Has High Tax Rates but Pays Less” (The New York Times, May 2, 2011). 14. Bartlett, Bruce, “Are Taxes in the U.S. High or Low?” (The New York Times , May 31, 2011). 15. Sorkin, Andrew Ross, “The Fallacy Behind Tax Policy” (The New York Times , September 5, 2011). Rattner, Steven, “The Corporate Tax Dodge” ( The New York Times, May 24, 2013). 16. Duhigg, Charles, and David Kocieniewski, “How Apple Sidesteps Billions in Taxes” (The New York Times , April 29, 2011).

Friedman, Thomas L., “Average Is Over, Part II” (The New York Times, 17. August 7, 2012). 18. Leonhardt, David, “The Paradox of Corporate Taxes” (The New York Times , February 1, 2011). 19. Kristof, Nicholas D., “Taxes and Billionaires” (The New York Times , July 6, 2011). 20. Fukuyama, Francis, discussed in Edsall, The Age of Austerity, pp . 147-148. 21. Kocieniewski, “Looking Closer at Taxes on the Rich” (The New York Times , June 13, 2012). 22. Leonhardt, David, “The 3 Biggest Tax Breaks and What They Cost Us” (The New York Times , April 17, 2011). 23. Hacker and Pierson, Winner-Take-All Politics, p. 87. 24. Blow, Charles M., “Where’s the Outrage?” (The New York Times, July 28, 2012). 25. “The Myth of Voter Fraud.” Editorial (The New York Times , October 9, 2011). 26. Mitt Romney’s Speech from Mother Jones video published by the New York Times , September 19, 2012. 27. Mann and Ornstein, It’s Even Worse Than It Looks, p. 59. 28. Mettler, Suzanne, “Our Hidden Government Benefits” (The New York Times, September 21, 2011). 29. Putnam, Bowling Alone, p. 35. 30. Ibid., pp. 218-221. 31. Source: SNL Kagan, a division of SNL Financial LLC. 32. Mann and Ornstein, It’s Even Worse Than It Looks, p. 62. 33. Sachs, The Price of Civilization, p. 155. 34. Bauerlein, Mark, The Dumbest Generation (New York: Penguin, 2008), p. 16. 35. Jacoby, Susan, The Age of American Unreason (New York: Vintage Books, 2008). 36. Kristof, Nicholas, “With a Few More Brains” (The New York Times , March 20, 2008). 37. Dionne, Our Divided Political Heart , p. 22.

Gabler, Neal, “The Elusive Big Idea” (The New York Times , August 14, 38. 2011). 39. Douthat, Ross, “The Online Looking” (The New York Times , August 15, 2011). 40. Frank, The Darwin Economy , p. 56. 41. Cushman Jr., John H., “Senate Stops Consumer Nominee” (The New York Times , December 8, 2011). 42. Collins, Gail, “The Ghost of Boyfriends Past” (The New York Times , December 9, 2011). 43. Krugman, Paul, “Obstruct and Exploit” (The New York Times , September 9, 2012). 44. Herbert, Bob, “When Democracy Weakens” (The New York Times , February 11, 2012). 45. Blow, Charles M., “Empire at the End of Decadence” (The New York Times , February 18, 2011). 46. Harrison, Lawrence E., The Central Liberal Truth: How Politics Can Change a Culture and Save It from Itself (New York: Oxford University Press, 2006), p. 2. 47. Shane, Scott, “The Opiate of Exceptionalism” ( The New York Times , October 12, 2012). 48. Rothkopf, The Epic Rivalry, p. 296. Chapter III America’s Socio-economic Stagnation: Debilitating Complexity and Misuse of National Wealth 1. Stiglitz, The Price of Inequality, pp. 175-176. 2. Kroeber, Configurations of Culture Growth, pp. 822-823. 3. Richtel, Matt, “Now, to Find a Parking Spot, Drivers Look on Their Phones” (The New York Times, May 7, 2011). 4. Weber, Max, The Sociology of Religion (Boston: Beacon Press, 1933), pp. xiv-xvii. Also, Weber, Max, The Theory of Social and Economic Organization (New York: The Free Press, 1947), pp. 8-86. 5. Rabinbach, Anson, The Human Motor (Berkeley: University of California Press, 1990), p. 85. 6. Marmor, Theodore R., and Jerry L. Mashaw, “How Do You Say ‘Economic Security’?” (The New York Times , October 23, 2011).

Keller, Bill, “The Entitled Generation” (The New York Times , July 30, 7. 2012). 8. Kristof, Nicholas D., “A Failed Experiment” (The New York Times , November 22, 20212). 9. Sachs, The Price of Civilization , p. 223. 10. Ibid., pp. 221-225. 11. Ibid., p. 220. 12. Ibid., p. 225. 13. Wilkinson and Pickett, The Spirit Level . 14. Stiglitz, The Price of Inequality, p. 183. 15. Blow, Charles M., “Inconvenient Income Inequality” (The New York Times , December 17, 2011). 16. Putnam, Bowling Alone, p. 359. 17. Friedman, Thomas L., “The Start-up of You” (The New York Times , July 12, 2011). 18. Tainter, Joseph A., The Collapse of Complex Societies (New York: Cambridge University Press, 2004), pp. 106-108. 19. Ibid., p. 203. 20. Smith, Hedrick, Who Stole the American Dream ? (New York: Random House, 2012), p. 356. 21. Putnam, Bowling Alone, p. 402. 22. Romer, Cristina D., “Cutting the Deficit, with Compassion” (The New York Times, September 9, 2012). 23. Krugman, Paul, “The Big Fail” (The New York Times, January 7, 2013). 24. Stiglitz, The Price of Inequality, pp. 91-92. 25. Ibid., p. 230. 26. Stockman, David A., “Four Deformations of the Apocalypse” (The New York Times , July 31, 2010). 27. Nocera, Joe, “While the Markets Swoon” (The New York Times , September 9, 2011). 28. Tritch, Teresa, “How the Deficit Got this Big” (The New York Times , July 24, 2011).

Douthat, Ross, “The Method to Their Madness” (The New York Times , 29. July 11, 2011). 30. Cassidy, John, “Who Killed the Middle Class?” ( The New Yorker , October 16, 1999), p. 32. 31. Hacker and Pierson, Winner-Take-All Politics , p. 3. 32. Ibid., p. 62. 33. Buffett, Warren E., “A Minimum Tax for the Wealthy” (The New York Times , November 26, 2012. 34. Hacker and Pierson, Winner-Take-All Politics , p. 75. 35. Appelbaum, Binyamin, and Robert Gebeloff, “Complaints Aside, Most Face Lower Tax Burden Than in the Reagan ’80s” (The New York Times , November 30, 2012). 36. Porter, Eduardo, “Broader Tax For Fighting Inequality” (The New York Times, November 28, 2012). 37. Sorokin, Social and Cultural Dynamics, p. 700. 38. Brander, B. G., Staring into Chaos: Explorations in the Decline of Western Civilization (Dallas: Spence, 1998), pp. 353-4. 39. Ibid., p. 351. Chapter IV Demise of the Middle Class Economy: Conflicting Economic Theories and Political Agendas 1. Reich, Aftershock, p. 5. 2. Ibid., p. 17. 3. Ibid., p. 19. 4. Ibid., pp. 29-31. 5. Frank, Robert H., Falling Behind: How Rising Inequality Harms the Middle Class (Berkeley: University of California Press, 2007), p. 8. 6. Ibid., p. 9. 7. Ibid., p. 10. 8. Ibid., p. 12. 9. Reich, Aftershock, pp. 62-63. 10. Ibid., p. 61.

Krugman, The Conscience of a Liberal, p. 45. 11. 12. Reich, Aftershock, p. 52. 13. Krugman, The Conscience of a Liberal, pp. 6-7. 14. Leonhardt, David, “Do Tax Cuts Lead to Economic Growth?” (The New York Times, September 16, 2012). Also, see Krugman, Paul, “Rubio and the Zombies” (The New York Times , February 14, 2013). 15. Frank, Falling Behind, p. 13. 16. Hacker and Pierson, Winner-Take-All Politics, p. 22. 17. Martin, Roger L., “Talent Shows” (The New York Times , September 28, 2012). 18. Reich, Aftershock, p. 28. 19. Smith, Who Stole the American Dream? p. 269; 20. Reich, Beyond Outrage , pp. 48-49. 21. Ibid., pp. 50-51. 22. Smith, Who Stole the American Dream? p. 49. 23. “Taking Aim at Michigan’s Middle Class.” Editorial (The New York Times , December 11, 2012). 24. Nocera, Joe, “No Respect for Unions” (The New York Times , June 5, 2012). 25. Greenhouse, Steven, “Share of the Work Force in a Union Falls to a 97Year Low, 11.3 Percent” (The New York Times , January 24, 2013). 26. Uchitelle, Louis, “Unions Yield on Wage Scales to Preserve Jobs” (The New York Times , November 19, 2010). 27. Vlasic, Bill, “To Make Tiny American Cars, GM Also Shrinks Plant and Wages” (The New York Times, July 12, 2011). 28. Morrow, Lance, “The Tempting of America” ( Time , June 24, 2001). 29. Rampell, Catherine, “At Well-Paying Law Firms, a Low-Paid Corner” (The New York Times, May 23, 2011). 30. Greenhouse, Steven, and David Leonhardt, “Real Wages Fail to Match a Rise in Productivity” (The New York Times , August 28, 2006). 31. Reich, Beyond Outrage, p. 47. 32. Cohen, Roger, “The Age of Outrage” (The New York Times, August 14, 2011).

Nocera, Joe, “What Is Business Waiting For?” (The New York Times , 33. August 15, 2011). 34. Smith, Hedrick, “When Capitalists Cared” (The New York Times , September 3, 2012). 35. Smith, Who Stole the American Dream? p. xxii. 36. Tacernise, Sabrina, “Recession Study Finds Hispanics Hit the Hardest” (The New York Times , July 26, 2011). 37. Edelman, Peter, “Poverty in America: Why Can’t We End It?” (The New York Times , July 29, 2012). 38. Stiglitz, The Price of Inequality, p. 11. 39. Hacker and Pierson, Winner-Take-All Politics, p. 23. 40. Reich, Beyond Outrage, pp. 4, 13. 41. Porter, Eduardo. “Misdirected Investments in Education” ( The New York Times April 3, 2013). 42. Edsall, Thomas B. “The War on Entitlements” (The New York Times, March 6, 2013). 43. Tacernise, “Recession Study Finds Hispanics Hit the Hardest.” 44. Leonhardt, David, “We’re Spent” (The New York Times , July 17, 2011). 45. Blow, Charles M., “Starving the Future” (The New York Times , August 25, 2012). 46. Nocera, Joe, “My Faith-Based Retirement” (The New York Times , April 27, 2012). 47. Smith, Who Stole the American Dream? pp. 19-20. 48. Ibid., p. 172. 49. Ibid., pp. 177-178. 50. Data provided by Brooks Hamilton: < http://www.pbs.org/wgbh/pages/ frontline/retirement/etc/tyranny.html > 51. Ibid., pp. 170-180. 52. Ibid., p. 170. 53. Blow, Charles M., “An Ode to Teachers” (The New York Times, September 3, 2011). 54. Kristof, Nicholas D., “Our Broken Escalator” (The New York Times , July 17, 2011).

Otterman, Sharon, “Data Show 37% of New York Students Meet 55. College-Readiness Standard” (The New York Times , June 15, 2011). 56. Phillips, Anna M., and Robert Gebeloff, “In Data, ‘A’ Schools Leave Many Not Ready for CUNY” (The New York Times , June 21, 2011). 57. Appelbaum, Binyamin, “How Party of Budget Restraint Shifted to ‘No New Taxes,’ Ever” (The New York Times , December 23, 2012). 58. Krugman, Paul, “That Terrible Trillion” (The New York Times , December 17, 2012). Krugman, Paul, “The Chutzpah Caucus” (The New York Times, May 16, 2013). 59. Wilkinson and Pickett, The Spirit Level, pp. 183-184. 60. Sachs, The Price of Civilization, pp. 221-225. 61. Wilkinson and Pickett, The Spirit Level, chapters 1-2, 4-11, and 13. 62. Reich, Beyond Outrage, pp. 25-26. 63. Rothkopf, “Redefining What No. 1 Means.” 64. Stiglitz, The Price of Inequality, p. 264. Chapter V Equitably Sharing Productivity in a Capitalist Democracy: Fundamental to Common Cause, Social Justice, and Economic Growth 1. Putnam, Bowling Alone, p. 359 2. Freeland, Chrystia, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (New York: The Penguin Press, 2012), p. 34. 3. Sachs, The Price of Civilization, pp. 245-247 . 4. Freeland, Plutocrats, pp. 8-9. 5. Ibid., p. 10. 6. Ibid., p. 11. 7. Ibid., pp. 16-17; quote from Joel Mokyr, Northwestern University. 8. Ibid., pp. 24-25. 9. Frank, Falling Behind, p. 7. 10. Stiglitz, The Price of Inequality, p. 249. 11. Lessig, Republic , Lost, p. 45. 12. Ibid., p. 47

Ibid. p. 48. 13. 14. Ibid., pp. 51-52. 15. Rothkopf, The Epic Rivalry, p. 10. 16. Durant, The Story of Civilization: Part II: The Life of Greece, p. 268. 17. Rawls, John, A Theory of Justice (Cambridge, MA: President and Fellows of Harvard College, 1971), p. 3. 18. Ibid., p. 7. 19. Ibid., pp. 14-15. 20. Ibid., p. 30. 21. Alperovitz, Gar, and Lew Daly, Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back (New York: New Press, 2009), p. 97. 22. Blow, Charles M., “Bitter Politics of Envy.” (The New York Times , January 14, 2012). 23. Sachs, The Price of Civilization, p. 210. 24. Wilkinson, and Pickett, The Spirit Level, p. 55, citing Eric Uslaner in The Moral Foundations. 25. Reich, Aftershock, p. 4. 26. Wilkinson, and Pickett, The Spirit Level . Chapter VI Narcissistic Individualism and Darwinian Economics: The Role of Social Capital and Human Behavior 1. Putnam, Bowling Alone, p. 25. 2. Ibid., pp. 40-42. 3. Ibid., pp. 42-45. 4. Ibid., p. 247. 5. Ibid., pp. 49, 56. 6. Ibid., pp. 65-66. 7. Ibid., pp. 76-77. 8. Ibid., p. 78, citing Robert Wuthnow, “Mobilizing Civic Engagement.” 9. Ibid., p. 79.

Ibid., p. 82, citing Henry S. Faber and Alan B. Krueger, “Union 10. Membership in the United States: The Decline Continues.” 11. Ibid., p. 85. 12. Ibid., p. 98. 13. Ibid., pp. 100-1. 14. Ibid., p. 105. 15. Ibid., pp. 109-110. 16. Ibid., pp. 112-13. 17. Ibid., pp. 113-14. 18. Ibid., p. 115. 19. Ibid., p. 123. 20. Ibid., p. 129. 21. Ibid., p. 187. 22. Ibid., p. 220. 23. Ibid., pp. 222-223. 24. Ibid., p. 237. 25. Ibid., p. 283. 26. Ibid., p. 273. 27. Dionne, Our Divided Political Heart . 28. Sorokin, Social and Cultural Dynamics, p. 7. 29. Ibid., p. 9. 30. Ibid., p. 633. 31. Frank, The Darwin Economy, p. ix. 32. Wapshott, Nicholas, Keynes Hayek: The Clash That Defined Modern Economics (New York: W. W. Norton, 2011), p. 151. 33. Marshall, Alfred, Principles of Economics, 8th ed. (London: Macmillan, 1927), p. 16. 34. Frank, The Darwin Economy . 35. Rothkopf, The Epic Rivalry, p. 103.

Ferguson, Niall, Colossus (New York: The Penguin Group, 2004), p. 268. 36. 37. Reich, Aftershock, p. 84. 38. Frank, Falling Behind, p. 20. 39. Ibid., p. 22. 40. Ibid., pp. 25-26. 41. Ibid., p. 39. 42. Ferguson, Civilization , p. 198. 43. Frank, Falling Behind, p. 44. 44. Ibid., p. 52. 45. Ibid., p. 56. 46. Lessig, Republic, Lost, p. 208, citing Rajan and Zingales, Saving Capitalism from the Capitalist . 47. Ibid., p. 208. 48. Frank, The Darwin Economy, p. 18. 49. Ibid., p. 7. 50. “The Disappearance of Tobacco Money.” Editorial (The Virginian Pilot , December 26, 2012). 51. McNeil Jr., Donald G., “Uphill Battle for Antismoking Campaigns in Poor and Middle-Income Countries” (The New York Times , August 20, 2012). 52. Rothkopf, The Epic Rivalry, p. 103. 53. Frank, The Darwin Economy, p. xi. 54. Ibid., pp. 85, 94. 55. Ferguson, Civilization , p. 201. 56. Lessnoff, Michael, The Spirit of Capitalism and the Protestant Ethic (Hants, England: Edward Elgar, 1994), pp. 1-15. Chapter VII Post-1980s New Republicanism: The Culture of the Old South Collides with the Rights and Freedom Revolution 1. Black, Earl, and Merle Black, The Rise of Southern Republicans (Cambridge, MA: The Belknap Press of Harvard University Press, 2002), p. 2.

McKee, Seth C., Republican Ascendancy in Southern U.S. House 2. Elections (Boulder, CO: Westview Press, 2010), p. 224. 3. Black and Black, The Rise of Southern Republicans , pp. 244-245, citing V. O. Key Jr. 4. Ibid., p. 400. 5. Ibid., p. 59. 6. Ibid., p. 377. 7. Ibid., pp. 40-41. 8. Ibid., p. 43. 9. Ibid. p. 377. 10. Ibid., p. 40. 11. McKee, Republican Ascendancy, p. 54. 12. Black and Black, The Rise of Southern Republicans , p. 212. 13. Ibid., p. 221. 14. Ibid., p. 201. 15. Ibid., p. 174. 16. Ibid., p. 182. 17. McKee, Republican Ascendancy, p. 71. 18. Ibid., p. 73. 19. Ibid., p. 8. 20. Ibid., p. 21. 21. Ibid., p. 77. 22. Ibid., p. 74. 23. Ibid., pp. 20-21. 24. Black and Black, The Rise of Southern Republicans , p. 379. 25. Ibid., p. 15. 26. Ibid., pp. 41, 212. 27. Rothkopf, The Epic Rivalry, p. 3. 28. Black and Black, The Rise of Southern Republicans , p. 369.

Ibid., p. 224. 29. 30. Mann and Ornstein, It’s Even Worse Than It Looks, p. 33. 31. Mann, Thomas E. and Norman J . Ornstein, The Broken Branch: How Congress Is Failing America and How to Get it Back on Track (New York: Cambridge University Press, 2008), p. 34. 32. Ibid., p. 36. 33. Ibid., p. 34. 34. Ibid., p. 36. 35. Mann and Ornstein, It’s Even Worse Than It Looks, p. 102. 36. Mann and Ornstein, The Broken Branch, p. 104. 37. Mann and Ornstein, It’s Even Worse Than It Looks, pp. 40, 42. 38. Ibid., p. 103. 39. Ibid., p. 8. 40. Reich, Beyond Outrage , p. 81. 41. Partisan Polarization Surges in Bush, Obama Years: Trends in American Values: 1987-2012 . Pew Research Center, 2012. American Values Survey, conducted April 4-15, 2012, among 3,008 adults nationwide. 42. Reich, Beyond Outrage , p. 69. 43. Black and Black, The Rise of Southern Republicans, pp. 225-227. 44. Ibid., p. 250. 45. Ibid., pp. 228-229. 46. Partisan Polarization Surges, Section 1. 47. Ibid., Section 9. 48. Ibid., Section 6. 49. Ibid., Section 2. 50. Ibid., Section 5. 51. Ibid., Section 4. 52. Ibid., Sections 1 and 4. 53. Ibid., Section 1. 54. Ibid., Section 8.

Edsall, The Age of Austerity, p. 40. 55. 56. Ibid., pp. 67-68. 57. Wilson, E. O., The Social Conquest of Earth (New York: W. W. Norton, 2012), p. 109. 58. Ibid., p. 133. 59. Krugman, The Conscience of a Liberal, pp. 11-12. 60. Davis, David Brion, “The Slave Power Conspiracy and the Paranoid Style” (Baton Rouge and London: Louisiana State University Press. 1969), p. 33, 67. 61. Shear, Michael D., “As Electorate Changes, Fresh Worry for GOP” (The New York Times , December 8, 2012). 62. Goldstein, Laurie, “Christian Right Failed to Sway Voters on Issues” (The New York Times, November 10, 2012). 63. “Political Scientist.” Editorial (The New York Times , December 8, 2012). 64. Cox, Daren L., “A New Southern Strategy” (The New York Times , November 18, 2012). 65. Blow, Charles M., “Lincoln, Liberty and Two Americas” (The New York Times , November 2012). Chapter VIII Big Money’s Grand Scheme and the Great Recession: Seizing Economic and Political Power (1970s-present) 1. Smith, Who Stole the American Dream? p. 47. Quote from Stephen Roach, former chief economist at Morgan Stanley. 2. Morgenson, Gretchen, and Joshua Rosner, Reckless Endangerment (New York: Henry Holt and Co. 2012), p. xiv. 3. Hacker and Pierson, Winner-Take-All Politics, p. 306. 4. Ibid., p. 171. 5. Ibid., p. 219. 6. Rothkopf, The Epic Rivalry, p. 184. 7. Ibid. p. 190. 8. Ibid., p. 193. 9. Porter, Eduardo, “How the Big Money Finds a Way In” (The New York Times , September 18, 2011).

“Living in a World.” Editorial (The New York Times , March 26, 2012). 10. 11. Blow, Charles M., “Deep Pockets, Deeply Political” (The New York Times, December 19, 2011 ). 12. www.Wsj.projects.wsj.com/super-pacs . 13. “Judicial Elections and the Bottom Line.” Editorial (The New York Times , August 20, 2012. 14. Mann and Ornstein, It’s Even Worse Than It Looks, p. 47. 15. Hacker and Pierson, Winner-Take-All Politics, p. 200. 16. Nocera, Joe, “The Last Moderate” (The New York Times, September 6, 2011). 17. Morgenson and Rosner, Reckless Endangerment, p. 108. 18. Hacker and Pierson, Winner-Take-All Politics , p. 198. 19. Ibid., p. 69. 20. Morgenson and Rosner, Reckless Endangerment, p. 110. 21. Ibid., pp. 112-113. 22. Ibid. pp. 115-117. 23. Hacker and Pierson, Winner-Take-All Politics, p. 69. 24. Lewis, Michael, The Big Short: Inside the Doomsday Machine (New York: W. W. Norton, 2011), p. 215. 25. Ibid., p. 256. 26. Ibid., p. 258. 27. Ibid., p. 72. 28. Cohan, Money and Power, p. 12. 29. McLean, Bethany, and Joe Nocera, All the Devils Are Here: The Hidden History of the Financial Crisis (New York: The Penguin Group, 2010), p. 53. 30. Lewis, The Big Short, pp. 72-73. 31. Ibid., pp. 75-76. 32. McLean and Nocera, All the Devils Are Here, p. 8. 33. Morgenson and Rosner, Reckless Endangerment, p. 280. 34. McLean and Nocera, All the Devils Are Here, p. 32.

Ibid., pp. 110, 118. 35. 36. Appelbaum, Binyamin, and Eric Dash, “S&P Downgrades Debt Rating of U.S. for the First time” (The New York Times , August 5, 2011). 37. Hacker and Pierson, Winner-Take-All Politics, p. 201. 38. Joshi, Pradnya, “We Knew They Got Raises. But This?” (The New York Times , July 2, 2011). 39. Davidoff, Steven M., “Weighing the Dodd-Frank Restrictions Against the Power of Big Banks” (The New York Times , October 17, 2012). 40. Dash, Eric, “Feasting on Paperwork” (The New York Times , September 9, 2011). 41. Smith, Who Stole the American Dream, p. 151. 42. Wyatt, Edward, “Dodd-Frank Under Fire a Year Later” (The New York Times, July 18, 2011). 43. Protess, Ben, “Court Ruling Offers Path for Challenging Dodd-Frank Rules” (The New York Times, August 17, 2012). 44. Eisinger, Jesse, “In Finance, Past Hints at Future” (The New York Times , February 9, 2011. 45. Dash, “Feasting on Paperwork.” 46. Appelbaum, Binyamin, “Inside the Fed in 2006 Coming Crisis and Banter” (The New York Times, January 12, 2012). 47. Popper, Nathaniel, “Back on street Arcane Names Hiding Big Risk” (The New York Times, April 4, 2013). Chapter IX Keynesian Economics to the Rescue:   .   .   . Again! From Roosevelt to Obama 1. Krugman, “That Terrible Trillion.” 2. Wapshott, Keynes Hayek, p. 85. 3. Ibid., p. 135. 4. Ibid., p. 230. 5. Ibid., p. 233. 6. Ibid., p. 239-240. 7. Ibid., p. 244-245. 8. Ibid., p. 280.

Ibid., p. 262. 9. 10. Stiglitz, The Price of Inequality, p. 71. 11. Krugman, Paul, “Reagan was a Keynesian” (The New York Times , June 8, 2012). 12. Stiglitz, The Price of Inequality, pp. 225-226. 13. Krugman, Paul, The Return of Depression Economics and the Crisis of 2008 (New York: W. W. Norton, 2009), p. 182. 14. Wapshott, Keynes Hayek, p. 294. 15. Ibid., 199-200. 16. Ibid., p. 279. 17. Ibid., p. 283. 18. Ibid., pp. 147, 281. 19. Ibid., p. 151. 20. Hacker and Pierson, Winner-Take-All Politics, p. 256. 21. Rattner, Steven, “Delusions About the Detroit Bailout” (The New York Times , February 24, 2012). 22. Goldfarb, Zachary A., “U.S. Revises Hiring Numbers: 453,000 More Jobs Added in Third Year of Recovery” (The New York Times , September 27, 2012). 23. Porter, Eduardo, “Stimulus Is Maligned, But Options Were Few” (The New York Times , February 29, 2012). 24. Firestone, David, “Don’t Tell Anyone, But the Stimulus Worked” (The New York Times , September 16, 2012). 25. Davidson, Adams, “God Save the British Economy” (The New York Times , December 23, 2012). 26. Romer, Cristina D., “Hey, Not So Fast On European Austerity” (The New York Times , April 29, 2012). 27. Porter, Eduardo, “A Keynesian Victory, But Austerity Stands Firm” ( The New York Times, May 22, 2013). Chapter X Shifting Philosophical Currents of Thought: Self-interest Defines Truth and Knowledge 1. Sorokin, Social and Cultural Dynamics, p. 231.

Kristof, Nicholas, “Failed Experiment” (The New York Times , 2. November 22, 2012). 3. Gillis, Justin, “Not Even Close: 2012 Was Hottest Ever in U.S.” (The New York Times, January 8, 2013). 4. Fears, Darryl, “Study Affirms Projected Ice Loss from Sheets in Greenland, Antarctica” (The Washington Post, November 30, 2012). 5. Warner, Judith, “The Way We Live” (The New York Times, February 25, 2011). 6. Broder, John M., “Skepticism on Climate Change Is Article of Faith for Tea Party” (The New York Times, November 21, 2010). 7. Kahneman, Daniel, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), pp. 13-14. 8. Durant, The Story of Civilization: Part II: The Life of Greece, p. 470. 9. Black and Black, The Rise of Southern Republicans , p. 221. 10. Kahneman, Thinking, Fast and Slow, p. 2011. 11. Ibid., p. 8. 12. Ibid., pp. 8-9. 13. Ibid., p. 103. 14. Ibid., p. 140. 15. Ibid., pp. 13-14. 16. Ibid., pp. 378-384. 17. Ibid., p. 377. 18. Ibid., p. 411. 19. Ibid., p. 384. 20. Ibid., pp. 270-274. 21. Sorokin, Social and Cultural Dynamics, pp. 6-11. 22. Ibid., p. 11. 23. Ibid., p. 14. 24. Ibid., pp. 226-256. 25. Ibid., pp. 676-692. 26. Ibid., pp. 226-335, 676-683.

Kroeber, Configurations of Culture Growth, p. 762. 27. 28. Ibid., p. 805. 29. Sorokin, Social and Cultural Dynamics, pp. 638-639. 30. Ibid., p. 269. 31. Durant, The Story of Civilization: Part II: The Life of Greece, p. 355. 32. Sorokin, Social and Cultural Dynamics, p. 272. 33. Ibid., p. 231. Chapter XI Comprehending America’s Cultural Dysfunction: The Science of Complex Systems and Chaos Theory 1. Keynes, John Maynard. 2. Mandelbrot, Benoit, The Fractal Geometry of Nature (New York: H. B. Fenn and Company Ltd. 1977), p. 201. 3. Page, Scott E., “Understanding Complexity,” the Teaching Company, 2009. 4. Stogatz, Steven, “Chaos,” the Teaching Company, 2008. 5. Brander, B. G., Staring into Chaos: Explorations in the Decline of Western Civilization (Dallas: Spence, 1998), pp. 353-354.