Stress testing the USA : public policy and reaction to disaster events [2 ed.] 9783030659998, 3030659992

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Stress Testing the USA Public Policy and Reaction to Disaster Events John Rennie Short Second Edition

Stress Testing the USA

John Rennie Short

Stress Testing the USA Public Policy and Reaction to Disaster Events

Second Edition

John Rennie Short School of Public Policy University of Maryland Baltimore County Baltimore, MD, USA

ISBN 978-3-030-65998-1 ISBN 978-3-030-65999-8 (eBook) https://doi.org/10.1007/978-3-030-65999-8 1st edition: © John Rennie Short 2013 2nd edition: © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

1

Introduction to Stress Testing the USA

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2

The War on Terror and the Costs of Empire

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3

Hurricane Katrina, Infrastructure Deficit and the Costs of Climate Change

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The Financial Crisis and the Costs of Neoliberalism

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The Gulf Oil Spill and the Costs of Regulatory Capture

127

6

The Pandemic and the Costs of an Unhealthy America

143

7

The United States of Stress

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Index

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v

CHAPTER 1

Introduction to Stress Testing the USA

The new millennium was not kind to the United States. The first decade of the twenty-first century was a decade of disasters. Four stand out. The first, emerging out of 9/11, was the War on Terror and especially the invasion of Iraq in 2003, which caused the deaths of 4400 US military personnel and left 32,000 wounded. Its cost, always a guesstimate, is anywhere between $740 billion and $1 trillion and the total cost of subsequent 9/11 wars from 2001 to 2020 is estimated at $6.4 trillion.1 The true cost is probably higher but unknowable. How do we factor in the cost of depression, poor health, and substance abuse of returning troops long after the conflict has ended? By almost any criterion, it was a tragedy. American lives and treasure were lost; a hundred thousand Iraqis died and millions more were displaced and fled the country. The United States was tainted, not strengthened, by the war and at the end of the war was less rather than more secure from terrorism. Indeed, the reasons for and conduct of the war probably led to the recruitment of many more would-be terrorists. The invasion of Iraq motivated rather than weakened our enemies and undercut support from our traditional allies across the world. Begun under dubious premises, it soon became a blunder of epic proportions. The title of Thomas Ricks’s 2006 book, one of the best books on the American military campaign in Iraq, says it all, Fiasco. Second, Hurricane Katrina led to the drowning of a major US city, the loss of 2000 lives, and the destruction of property along the Gulf © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8_1

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Coast. It was less a natural than a preventable disaster, exacerbated by inadequate infrastructure, poor environmental management, and a tardy and ineffective governmental response. Years after the event, large parts of the city of New Orleans have yet to recover. Third, in 2008 the Dow Jones Industrial Average plummeted from 14,066 on October 12 to 6626 in March 2009. Trillions of dollars of value on the stock market evaporated in the subsequent recession along with the financial security of millions of households. The economic ripples were felt around the globe. And fitting for its worldwide ripples, it is commonly referred to as the Global Financial Crisis (GFC). In the United States, house prices collapsed, seven million families lost their homes, four million jobs were lost in 18 months, and unemployment reached almost 10 percent. It was the Great Recession, a downward economic slide not seen since the 1930s. Then, there was the BP oil spill in the Gulf of Mexico. On April 20, 2010, an explosion aboard the Deepwater Horizon drilling rig led to oil gushing uncontrollably from the underground reservoir. For 87 days, 53,000 barrels a day, almost five million gallons in all, escaped from the well into the Gulf of Mexico, poisoning the water, contaminating the beaches, and killing sea creatures and animal life. Day after day the televised images showed oil flowing uncontrollably from the deep earth into the sea. The event highlighted corporate indifference and government inadequacy in dealing with the risks of deep-sea drilling. The second decade started well. A long recovery from the GFC was reducing unemployment. The economy was growing. The War on Terror continued but there was no longer the same existential threat. New Orleans was being rebuilt and the levees that surrounded the city were raised and hardened for future storms. The oil spill in the Gulf was brought under control and lessons were learned about the regulation of offshore oilrigs. By the end of the second decade, things seemed to be back on an even keel. Then, came 2020. A global pandemic swept the world, but death rates in the United States were higher than most other developed countries. By the end of February 2021, half a million people in the United States had died as a direct result of the virus. The pandemic revealed the major cleavage on US society and the flaws in US public health. The tardy response highlighted the crisis in governance. And in 2020, when George Floyd, a 46-year old Black man was killed by police, the latest in a long and seemingly endless death of black people at the

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hands of police, it sparked not only national conversations about race, about policing but also about the very nature of US society. These five events broke all kinds of records: the longest foreign war, the costliest “natural” disaster, the biggest economic downturn sincethe Great Depression; the largest oil spill; and the worst pandemic since 1918. Not just a quiet police action like Grenada, a memorable hurricane like Andrew, an economic downturn as in the early 1990s, an “average” oil spill, or a typical epidemic like the flu. No, they were of such a magnitude, individually and collectively, that they provide a perfect storm of a combined stress test. They reveal what the mundane and the ordinary cannot. Not simply was the size impressive in each case, but so was the level of incompetence: military fiasco, an emergency response debacle, economic mismanagement of epic proportions, an environmental tragedy, a botched pandemic response that turned into a public health catastrophe—five huge disasters all in one decade. If triumphal success justifies social institutions, extreme failure should produce piercing critiques of them. The events represent extreme cases and thus the most profound of stress tests. In this book, I will stress test the United States using these five case studies to highlight fundamental fractures in US society. Stress testing is a long-established procedure to determine the stability of a system. Software is stress tested to see how it reacts with heavy Internet traffic. So are our hearts when the doctor makes us ride stationary bikes and then monitors our heartbeat and blood pressure. Force is applied to containers to determine how they stand up to heavier-than-normal loads. Economists also bring stress testing into play when they utilize models to assess changing variables, such as when interest rates rise sharply, demand shrinks, or supplies dwindle. There is now an annual stress test of major US banks. Stress testing shows how a system responds to pressure and, if carried far enough, highlights the system’s weak spots. It reveals how a system responds in a crisis and exposes its deep structural flaws. The stress testing used here is not an empirical technique but rather an analysis of the events in some detail and a widening of the frame of reference so that we move on from assigning blame to individuals to identifying the deeper and more profound causes. The stress test used here foregrounds a search for structural, endemic causes of the apocalyptic events of the new millennium rather than assigning individual culpability. It is so much simpler if we could just blame George Bush, Michael Brown, greedy bankers, the CEO of BP, Donald Trump: their failures, however

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palpable, nevertheless transcend them. The size and impact of the disasters discussed in this book, like all good stress tests, tell us more about fundamental weaknesses in social structure than simply reconfirm the eternal verities of human frailty. In 1979 during a televised speech to the nation, President Jimmy Carter addressed the looming energy crisis and the deepening recession. He said, “It’s clear that the real problems of our Nation are much deeper.” It was not a popular or successful speech. It is now described as the “malaise speech,” much criticized for presenting problems not solutions. A year later, Ronald Reagan beat him in the presidential race. Reagan offered a sunny optimism, a hope in a future presided over by the United States. While there are many who believe that Reagan turned the country around, there are some, like me, who see his presidential victory as inaugurating a huge military buildup, rising deficits, and a massive transfer of national wealth from the poor and the middle classes to the very wealthy. Reagan’s new dawn in America shone most warmly on the rich. The fate of Jimmy Carter’s failed second presidential bid should be a warning to those who ask the United States to look at the deeper problems. A nation that is so invested in an optimistic future rarely takes time to attend to the anxieties of the present, let alone to acknowledge the failings of the past. It is a national habit to “put things behind us,” “look to tomorrow,” to “move to the next level,” “win the future,” a trait that is superficially constructive, but actually avoids any sustained search for structural weakness, as it alights upon the quick fix. The disasters are of such magnitude that they demand a sober assessment of the United States and its institutions rather than an unthinking affirmation. I am perhaps genetically programmed to focus on problems. I was born in Europe, Scotland to be precise, where the past hangs heavy. The great years of Scotland’s global eminence during the Enlightenment, when it was one of the centers of intellectual thought and then one of the epicenters of the Industrial Revolution, are long over. Located on the periphery of the periphery, shaded with the darker hues of Scottish Presbyterianism and burdened with long historical memories, late-twentieth-century Scotland was not a place to engender a fierce commitment to the future. It was not a place of despair; rising living standards took care of that. But it was a place where the future was to be managed with care, not embraced with abandon. I took these sensibilities with me when as an adult I relocated to the United States. I have now lived here for more than 30 years, my accent a constant reminder of where I came from. The result then is

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a book written by someone raised in Scotland, the old Europe, but living in the New World of the United States. I have held onto my intellectual legacy but imbibed a belief in the future. A dour Scottish Presbyterianism meets a New World sunny optimism is the unlikely result. A foreign-born longtime citizen, I am reminded of my liminal (dis)location when Americans tell me I have a strong Scottish accent and my family in Scotland remind me that I sound very American. It is this awkward shifting space that provides the perspective for this book. But the United States is also losing some of its easy optimism, chastened no doubt by the four events. There is now a deep sense of pessimism in the United States. In a poll conducted in January 2012 by Rasmussen Reports, 60 percent of people interviewed in a telephone survey responded that they felt the country was going in the wrong direction.2 Eight years later in September 2020, it was 69 percent.3 Other surveys reveal similar if not higher levels of disapproval. There is a darkening mood to the national spirit. Not only is there a lack of confidence in specific government policies, but the belief in the idea of government itself is at an all-time low. Approval rating for Congress is in the single digits. Across the spectrum of political opinion there is a profound sense that the country has lost its way. Compounding the feeling of malaise, there is no general agreement in which direction it should be headed. Election results embody rather than solve the deadlock. The United States remains a house divided. While some propose even more military spending, deeper tax cuts, and further deregulation, some others argue that this is exactly the policy that got us into the present mess. While the sense of pessimism is shared, there is no general agreement on the direction of the way forward. There is a real sense that the country is floundering. In this book I will examine some of the events that got us into the present state. I will also look at how these events reveal some of the structural flaws that we need to address if we are to move forward. I will conduct a stress test of the United States. The book is meant not to anchor us in despair because of the depth of the structural problems. It is not, I hope, solely a “malaise” book. However, optimism unconnected to realities is a naiveté that risks perpetual disappointment. It is only by identifying the profound problems can we address and overcome them. Only by soberly identifying the deeper origins of our crises can we map a successful path to the future. A belief in a better future requires a deeper understanding of the crises of the present.

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Crises and disasters reveal, like nothing else, the fracture lines within a society. In this book, I will explore the five events to see what they reveal about the fracture lines, strengths, and weaknesses in US society. I explore their settings, causes, consequences, and representations. It is not a politically partisan exercise; rather, the events will be a prism through which to view issues of power, class, race, money, globalization, the meaning of patriotism and citizenship, environmental issues, and private influences on government and public policy. It will highlight the unexpected consequences of agreed-upon ideas. The book is less about assigning blame than about uncovering structural faults.

Notes 1. Stiglitz, J., & Bilmes, L. (2008). The three trillion war: The true cost of the Iraq conflict. Norton. Crawford, N. (2019). United States budgetary costs and obligations of post-9/11 wars through FY2020: $6.4 trillion. Costs of War Project. Brown University. https://tinyurl.com/y6ckw9m3. Accessed 5 Oct 2020. 2. https://www.rasmussenreports.com/public_content/politics/mood_of_a merica/right_direction_or_wrong_track. Accessed 10 Feb 2012. 3. https://www.rasmussenreports.com/public_content/politics/weekly_upd ates/what_they_told_us_sep05. Accessed 7 Sept 2020.

CHAPTER 2

The War on Terror and the Costs of Empire

The War on Terror was first announced less than a week after the 9/11 attack on the United States. On September 16, 2001, George Bush said, “the American people understand, this crusade, this war on terrorism, is going to take a while.” Not only was a war announced, but it was also given a name, The War on Terror. And it was just not a war but The War. And the enemy was not a narrow group of antagonists but all those who would commit terror. Waging a war is one of the biggest burdens for any society and the stresses of this war tested the United States to its breaking point. The War on Terror was an open-ended and vaguely strategized response that would quickly mire the United States in a fiasco in Iraq and then an openended and seemingly endless commitment in Afghanistan that strategists deemed, “The Long War.” How are we to situate this war? So soon after 9/11 it seems we have a simple origin: a swift response to an unprecedented attack on innocent civilians in the United States. In this reading, the shallow and narrow view, the resulting problems are then just short-term tactical blunders that tell us about the failings of the Bush administration and its flawed policies. This is the standard interpretation made attractive by its simplicity. And it can be made even simpler through personalization: Bush is to blame. Eager to assert military might, he was unconcerned about the postwar construction of the country he ordered to be invaded. And a slice of blame should be placed on Cheney: the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8_2

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vice president who refused to believe intelligence that did not support his long-held belief that the United States should invade Iraq. And then there was Rumsfeld: the defense secretary whose arrogance covered an almost criminal incompetence in managing postwar Iraq. And there was Paul Wolfowitz, whose decades-long obsession with Iraq led him to promote the invasion of the country even while the World Trade Center was still smoldering and there was absolutely no proof of Saddam Hussein’s involvement in 9/11. There is a lot of raw material for the simplistic blame-the-incompetents argument, but it does not provide a deep stress test. Change the president, vote out the administration, or change the policy and, according to this perspective, the problem is solved. But the flaws are much deeper than one misguided president, a war-mongering vice president, an arrogant and incompetent defense secretary, or an Iraqobsessed advisor and far longer than a two-term administration. The Long War and its legacies continued long after the cast of characters responsible for the fiasco in Iraq had left the national political stage. The very limited interpretation that focuses on one administration’s failure does not stand up to even the rudest of scrutiny. Even if we concentrate on the very immediate decisions, the responsibility quickly shifts from just a narrow group in the Bush administration. It was not just the president who made “wrong decisions” but the Congress, Democrats as well as Republicans, the Pentagon, and the Joint Chiefs of Staff. An embedded press provided cover and support. And early on, The War on Terror received tremendous public support. The conception and implementation of The War on Terror and the invasion of Iraq did not just reveal the mistakes of one administration and the failure of sensible leadership to emerge at a time of crisis; they also highlight the fundamental problems of a United States committed to global military intervention. I will refer to this commitment as Empire. From this wider frame and deeper historical context, the problematic nature of the invasion of Iraq suggests a longer and more complex genealogy. Big events, such as a longrunning war, rarely have singular origins. And epic failures have multiple births. The catastrophe of the invasion of Iraq and the ongoing fallout from the War on Terror results from the imperial posture of the United States.

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The Rise of Empire Immediately after the Second World War, the United States began a pronounced demobilization. By 1948 the numbers mobilized shrunk to just over half a million in the Army and less than half a million in the Navy from a peak of 11 million at the height of the war. Despite the vastness of the enterprise and the globality of the conflict, the United States was doing what it had always done—mass and rapid demobilization after war. The military was set to return to its default position of always small with little direct influence on the broad contours of public political debates. But this time was to be different as the United States began its rise as a global superpower. It started as a defensive posture. In 1946 a young diplomat in Moscow, George Kennan, sent a long telegram to Washington outlining a containment policy for a perceived Soviet threat. In March 1947 President Truman announced to the world that the United States would “support free peoples who are resisting subjugation.” The Truman Doctrine, enunciated during a civil war in Greece, gave official weight to the notion of containment. It was a warning shot against what Truman and many others saw as Soviet expansionism. In a growing climate of postwar paranoia, Congress later on that same year passed the National Security Act, which created the National Security Council and the Central Intelligence Agency (CIA) and reshaped the Department of Defense as the largest and most influential of government agencies. The world was reimagined as the stage for global conflict, a Manichean struggle between good and evil, right and wrong, democracy and capitalism against an expanding communism bent on world domination. The Bush administration framed the War on Terror as a similarly Manichean struggle. The United States was able to imagine this global role for itself because it was the largest economy at the end of the Second World War. The old imperial powers such as the United Kingdom and France were bankrupt, and Japan and Germany were defeated. The Soviet Union experienced huge wartime losses of people and resources. A more sober assessment could have depicted the USSR as what Daniel Yergin called a “cruel, clumsy, bureaucratized fear-ridden despotism” just hanging on to power. But a Soviet Union of formidable power and efficiency was represented instead, all the better to frame the US response. From this “foundational paranoia,” emerged the outline of an imperial United States. It was never described in those terms. The words and images of Empire

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and imperialism were tainted because of its association with European colonialism. For domestic consumption the United States was never an empire, simply a powerful force for good, keeping the darkness at bay, spreading the light of democracy and the unalloyed benefits of capitalism. America stood for democracy, freedom, and liberty. Who could question these ideals? And the obligatory answer is, only those promoting undemocratic regimes, unfree societies, and a totalitarian agenda. The United States was portrayed at home as a force against evil, a knight in shining armor, which allowed the country to be inextricably linked to the rest of the world as a nation permanently at arms. Now, “America’s interests and responsibilities were unrestricted and global.”1 Paranoia increased in 1949 when communists gained control of China after decades of civil war, and the Soviets exploded their first atomic weapon. The response was a 58-page report produced by the newly established National Security Council. Known as NSC-68, the report outlined a global strategy for the United States of a massive buildup of military power to achieve “situations of strength.” It was an open-ended commitment to an Empire of global reach and military dominance. However, the potential costs of the new role were initially too much for Truman. In 1949 the expanded global military presence was a plan, a hope, a fantasy. And although Truman enunciated his doctrine, US troops were not sent to Greece during its civil war. Between the rhetoric of Empire and the political realities, there was a large gap filled by caution, uncertainty, and a sober assessment of the costs. Korea changed everything. On June 25, 1950, at Ongjin, northwest of Seoul, fighting broke out between the Democratic People’s Republic of Korea, (DPRK, henceforth North Korea) and the Republic of Korea (ROK, henceforth South Korea). North Korean forces quickly overran much of the peninsula as South Korean forces scattered and ran. By midSeptember the North Korean Army had pushed all the way south to Pusan in the far south of the peninsula. The United States sent troops to South Korea, persuaded the United Nations (UN) to get involved, and quickly pushed the North Koreans all the way back north to the border of China on the Yalu River. The Chinese Army also entered the conflict supporting North Korea and launched a counteroffensive that pushed the US–UN forces back to the 38th parallel. Rapid advances and retreats on both sides stalled by June 1951, and the war became a static trench war. The divide between North and South created after the ceasefire in 1953 formed a front line between the communist and capitalist

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blocs of the Cold War. The Korean War was a bloody encounter. From hostilities breaking out in 1950 to the armistice in 1953, military and civilian casualties and deaths are estimated at between 4.2 and 4.7 million. It also marked the beginning of the US Empire.2 The Korean War propelled the United States into a permanent global empire. The sudden advance and stunning success of the North Korean Army called into question the credibility of the fledgling superpower of the United States. Korea turned a tentative notion and inchoate desire into the hard reality of Empire as US troops were shipped to the peninsula, North Korea was invaded, and permanent military bases were established. Korea crystallized the postwar paranoia, allowing a quadrupling of the US defense budget, the official adoption of NSC-68, and the domestic acceptance that the United States would have a permanent military presence far from home. The war in Korea “occasioned the enormous foreign military base structure and the domestic military–industrial complex to service it.”3 The Empire that first emerged from the Korean War is now a sprawling archipelago of military bases around the world, a vast military–industrial security complex backing a pervasive worldview dominated by visions of global hegemony. There are now at least 800 bases with 200,000 US military personnel spread around the world in at least 80 countries at a cost of $150 billion a year.4 From the ending of the Second World War until today, the United States has redefined itself as a national security state with global reach, while war and military involvement were normalized by a self-fulfilling predisposition to paranoia. There were always critics of Empire. The title of the American AntiImperial League established in 1898 summed up their basic position. There were also the critics who argued, and continue to argue, that expansion overseas diverts the nation from the construction of true democracy at home.5 Opposition also came from more unusual sources. President Eisenhower, a Republican and former military leader, gave a farewell address to the nation on January 17, 1961, in which he warned his fellow Americans of the political influence of a military–industrial complex of “an immense military establishment and a large arms industry.” He spoke of the grave implications of a huge defense establishment. It is still an amazing speech. Eisenhower was a professional military man, supreme commander of Allied forces in Europe during the Second World War, and no stranger to war. And yet he realized the dangers of a rising militarism and in a striking metaphor of arms spending spoke of “humanity hanging

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from a cross of iron.” It was a recurring worry to Eisenhower. He gave a speech in the first year of his presidency in 1953 when he warned of excessive defense spending. The farewell speech was not a rushed afterthought; Eisenhower worked on at least 20 drafts. The final version was the result of a decade of rising concern with the emergence of an American Empire. Critics notwithstanding, the empire grew and expanded. There were ebbs and flows in the course of Empire. Plotting the Department of Defense (DOD) budget, for example, reveals four postwar peaks. There was the huge spike of the Korean War when annual defense spending reached $500 billion (in 2002 dollars), two smaller spikes topping $400 billion during the Vietnam War and Reagan’s military buildup in the 1980s, and then a huge increase in the wake of 9/11. By 2010 the DOD total budget, including the costs of the war in Iraq and Afghanistan, was $685 billion—doubling from the 2001 figure. Defense spending now accounts for 23 percent of all federal spending in the United States. A complex web of connection links the military with armaments manufacturers and political representatives. The revolving door propels former military and political figures into lucrative corporate appointments as lobbyists and consultants. The arms industry provides jobs in congressional districts, keeping politicians in power. The manufacturers promote more value-added technologies to a military eager to spend and to politicians eager to burnish their commitment to defense spending. A lethal alliance of politics, economics, and military promotes a continual spending on war despite its designation as “defense spending.” The United States is the single biggest military spender in the world, responsible for almost 40 percent of total global arms spending. Its military expenditure is now greater than the next 10 largest military powers combined.6 Once the Empire was established it soon developed an expansionary dynamic. Threats, both real and imagined, included phony missile gaps, a Vietnamese peasant uprising recast as a Communist takeover, national liberation movements perceived as communist insurgents, and a Soviet Empire on the verge of collapse portrayed as an expansionary force. Local events reimagined as global conspiracies all helped to fuel imperial expansion. And even when the Soviet empire did collapse in 1989, there was no long-lasting peace dividend. As we will see, the US role was reimagined from a containment of communism to the single global power responsible for global security. The bipolarity of the Cold War was replaced by

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the unipolarity of American power reaching across the globe. In a stunning twist, the collapse of the USSR signaled not the abatement of the US Empire but its enlargement and expansion. Empire fed on itself: a vast military–industrial-security complex was established with a huge and insatiable appetite for expansion and growth. Its tentacles reaching into every state and congressional district ensured widespread political support for a distribution of bases abroad and an unwavering acceptance at home that the United States could and should pursue global reach to maintain hegemony. Empire needs a shadow. To justify the huge costs, an equally large counterforce needs to be imagined, created, or invented. This was easy during the Cold War when an “evil” Soviet empire fitted the bill. With the USSR’s demise came a brief period of uncertainty before global terrorism became the shadow of the US empire, standing for everything bad against everything good, the evil empire counter to the good empire. The Empire needs enemies, which have to be of some consequence to justify and legitimate their counterweights. Acts of terrorism are thus seen as acts of war, assassins as criminal masterminds. Shadow empires, if absent, are soon manufactured and invented. And if no specific animus is found, then a more general notion of maintaining a global order is employed or a vaguely defined global terrorist threat is conjured up. The shadow can be strategically invoked. As the war on Iraq failed to show progress and criticism was mounting, Rumsfeld circulated a 15point memo on April 19, 2006. “Keep elevating the threat,” he noted in point 14. The next point went on to say, “Talk about Somalia, the Philippines, etc. Make sure the American people realize they are surrounded in the world by violent extremists.”7 It is in the interests of many leaders to jack up the level of threat and portray a picture of a United States beleaguered by enemies. The shadow justifies Empire. As a vital prop of Empire, the shadow is always there, real or imagined. A permanent threat is invoked, morphing over time from Soviet expansionism to global terrorism. A never-ending threat is used to justify American military power, promote the Pentagon’s global footprint, justify massive military expenditures and evoke the public’s support of Empire. The United States is placed on the path of persistent conflict, recurring national security crises, a never-ending war. A permanent war, either in process, or in preparation, is the tragic outcome of the US Empire.8

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Entanglements and Blowback A global presence means that the United States can be entangled by political events around the world. The manager of the global world order may quickly become caught up in national and local situations that confound, confuse, and penalize. On November 26, 1979, the ruling elite of the Soviet Union, the Politburo’s inner circle, decided to invade Afghanistan. A month later, on Christmas Eve, troops from the 40th Soviet Army were deployed. The Soviet, and before them the pre-Soviet Russian governments were long interested in the country situated close to its southern border, a zone made vulnerable by the explosive mix of ethnicities, nationalities, and religious affiliations. The country was the single biggest recipient of USSR foreign aid. In 1978 a small urban-based, Communist party overthrew the existing government that itself was established after a coup against King Mohammad Zahir Shah in 1973. The events were a result of internal tensions and not Soviet expansionism per se, but the new socialist neighbor was appreciated by the Soviets who stepped up aid. The new regime was thuggish and deeply factionalized. It forced its policies too quickly and brutally on the Afghans, and when it faced extreme resistance it jailed and killed opposition members. The growing repression whittled away most of the remaining support and soon most of the rural areas were in open revolt. The government in Kabul appealed for Soviet aid. The Soviets believed that the regime would not remain in power without military intervention and the removal of the president. Soviet troops entered the country, killed the existing president Hafizullah Amin, and established Babrak Karmal as president. Soon there were over 100,000 Soviet military personnel in the country. In the summer of 1979 Carter had authorized funding of anticommunist guerrillas in Afghanistan. Aid and money from the United States increased during the 1980s. Aiding the guerrillas was seen as a way to drain the power and prestige of the Soviet Union. Afghanistan was a wound that could be deepened to bleed the Soviet empire. The United States joined Saudi Arabia and Pakistan in funding and training resisters to Soviet occupation. There were diverse groups, such as Tajiks and Pashtuns, and competing warlords. The insurrection also caught the imagination of Islamicists who saw the struggle as a jihad, a holy war between the followers of Islam and the godless communists. Mujahedeen, roughly translated from Arabic, means people undertaking jihad. Arabs such as Osama bin Laden joined the fight. The United States in effect

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helped pave the path to power for the Taliban that later provided refuge to bin Laden. On August 2, 1991, Iraqi troops invaded the oil-rich Persian Gulf state of Kuwait. The United States swiftly responded. This was Empire 2.0, when there was no risk of nuclear war as the Soviet Union had faded into history. There was the Carter Doctrine to uphold, and Kuwait was an oil-rich state. Under President George H. W. Bush, the United States initiated sanctions and organized a coalition of international forces to force the Iraqis out of Kuwait. Alliances and loyalties can quickly change. Iraq was controlled by Saddam Hussein, previously supported by the United States in the Iran-Iraq War (1980–1988). With that war now consigned to history, Saddam Hussein was no longer an ally but now the enemy. The Gulf War was a great success for the United States. The Saudi government footed more than half of the total bill, and the coalition forces defeated the Iraqis in a stunningly quick campaign with very few casualties. The coalition forces were poised to topple the entire Hussein regime but stopped well short of Baghdad. The failure to topple Hussein rankled many right-wingers who were to become influential members of the next Bush’s presidency. The entry of infidel troops into Arab lands outraged radical Islamicists such as Osama bin Laden. Buoyed by the defeat of the Soviet superpower in Afghanistan and motivated by a deep anti-modern, anti-US sentiment, terrorist groups began to form. Following on from the entry of US troops into the Kingdom of Saudi Arabia, a sustained terrorist campaign was launched against the United States and its interests abroad. There was a blowback of costs and consequences to Empire.9 Throughout the summer of 2001, Al Qaeda recalled its senior operatives to Afghanistan. The US intelligence-gathering communities reported enormous “chatter.” On the morning of September 11, 2001, 19 young Arab men boarded four westbound aircraft on the east coast of the United States, which they hijacked soon after takeoff. At 8:46 A.M., American Airlines Flight 11 flew directly into the North Tower of the twin-towered World Trade Center. Seventeen minutes later, United Airlines Flight 175 crashed into the South Tower. Little more than 30 minutes later, American Airlines Flight 77 crashed into the outer ring of the Pentagon in Washington, DC. On the final hijacked plane, United Airlines Flight 93, the passengers, now aware of the hijackers’ deadly mission, struggled to regain control of the plane. It crashed into a field in Shanksville, Pennsylvania, killing all on board.

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In New York City the explosive power of jet-fuel burned off the fireproofing of the steel towers. Without thermal insulation the steel structure burned, destroying the structural integrity of the buildings. Around 10 A.M. the South Tower collapsed, and half an hour later the North Tower also fell in a cascading, accelerating crumple. The final death toll was nearly 3000 victims killed, plus the 19 hijackers who committed suicide. The attack was stunning. The images of the planes flying into the World Trade Centers and their subsequent collapse into dust were incessantly replayed in the mass media. Again, and again, the planes crashed, and the towers continued to fall until the repetition numbed, but never quite deadened, the senses.

The Empire Strikes Back In the aftermath of the 9/11 attack, the US government response soon crystallized into the War on Terror, the invasion of Afghanistan, and the Patriot Act. A major structural problem with Empire is the tendency to militarize complex issues. The declaration of war is made easier simply because of the fact of Empire. You have a military; you are attacked; employ the military. It seems obvious and simple. And yet other terrorist attacks around the world have not resulted in a declaration of war. There are many reasons for this restraint but chief among them is that the country of the victims rarely has the military heft to respond in such a way or the perceived status that requires a military response. When Al Qaeda bombed the embassies in 1998, the governments of Kenya and Tanzania did not declare a war. Declaration of war requires military assets, geopolitical strength, and domestic support. Above all the mindset of Empire accepts war as a reasonable and legitimate response. Declaring a war also sets in train a series of events: in this case, it gave cover to the abrogation of individual rights by the Patriot Act and it short-circuited criticism as discourse shifted from an evaluation of different policy options to a reinforcement of patriotism. Declaring a war turned sober assessments of policy responses into performances of patriotism. Entire sets of policy options were ignored or abandoned, and critics marginalized as unpatriotic while military solutions were prioritized. Declaring a war also radicalized Islamic youth, gave the oxygen of publicity to Al Qaeda, and made Osama bin Laden the embodiment of resistance to US imperialism.

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Military empires that feel threatened all too easily revert to military solutions. As we piece together the recollections and reminiscences as well as the more formal records, it is clear that 9/11 was quickly appropriated for the wider geopolitical purposes of redrawing the map in the Middle East by getting rid of Saddam Hussein, installing a pro-US collaborative elite, and sending a message to Syria and Iran. Declaring a war gave cover to these broader and deeper objectives given space by the sole dominance of US military power with the decline and fall of the USSR. The CIA was convinced from the earliest hours of the 9/11 attacks that they had all the hallmarks of an Al Qaeda—planned attack. But senior administration and White House staff wanted to shift the blame and widen the response. On the very first day after the attack, National Security Advisor Condoleezza Rice suggested Saddam Hussein might be involved. Rumsfeld asked how we could bring Hussein into this, and Paul Wolfowitz answered by suggesting an attack on Iraq. This was on day one before a shred of evidence was presented or even manufactured. On the very first day after 9/11 Cheney, Rumsfeld, and Wolfowitz all envisaged an attack against Hussein. Key members of the Bush war cabinet, whose shared ideology and personal histories are notably described by one author as “the rise of the Vulcans,” wanted to make a link between 9/11 and Saddam Hussein in order to justify a long-considered attack on his regime. Nine/eleven was not the reason to invade Iraq but the excuse. It presented the opportunity to pursue a broader geopolitical policy that had been worked out for years by a small group of influential Republicans including Cheney, Rice, Rumsfeld, and Wolfowitz. This Washington military-intellectual complex had long argued the case for the invasion of Iraq.10 In order to sell the invasion of Iraq to the wider public, more than just grand geopolitical strategies needed to be invoked. The administration sought to show, in a long campaign aided by an uncritical mass media, that there was a link between Hussein’s regime and the 9/11 attackers, and that Iraq was harboring weapons of mass destruction (WMD) for possible use against the United States and its allies, especially Israel. Invading Iraq was presented as a proportional response to 9/11 and as a legitimate preemptive strike against an evil dictatorship bent on attacking the United States. The CIA resisted the slide toward war with Iraq. Their analysts argued that the information did not reveal a link between Al Qaeda and Saddam Hussein, and there was little evidence that Hussein had WMD. Wolfowitz,

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for whom overthrowing Hussein was a 20-year obsession, along with Cheney and Rumsfeld continued to argue for a strike against Iraq. Rice, more a determined careerist than committed ideologue, went along with the dominant opinion. Cheney as vice president refused to believe the CIA version that there was no link between the terrorist group and the Iraqi leadership. He kept asking them to look again to find the link. Rumsfeld, also annoyed at the answers from the CIA, set up an intelligence effort separate from the CIA to look for the connection. The Office of Special Plans set up by Rumsfeld looked until they found the necessary intelligence, provided by Iraqi exile Ahmed Chalabi, all of it completely bogus, as we now know. There were critics early on of the drift toward war with Iraq. Secretary of State Colin Powell resisted the overall direction of policy. Brent Scowcroft, a national security advisor to Ford and Bush senior, warned in 2002 of the dangers of war with Iraq. CIA officers kept saying there was no link between Al Qaeda and Saddam Hussein. Few people other than Wolfowitz and Cheney believed anything that Chalabi said, most thought he was a self-promoting charlatan. Wolfowitz was almost alone in his naïve belief that there would be quick handover of power to a Chalabi warmly received by the Iraqi people, despite his lack of any sort of power base, name recognition, or connections in Iraq. The intelligence was wrapped around the policy to invade Iraq, which was little more than a preemptive strike to install elites more closely connected to US goals in the Middle East. Good people can see different realities. Yet this was not simply a case where people saw different things: certain people wanted to see different things. Where some saw no link, no evidence of weapons of mass destruction, others saw smoking guns and mushroom clouds. And here we come to the second structural weakness of Empire: the tendency to delegitimize critics of war policies. Declarations of war are used to unify the country and thus allow easier passage of contentious policies. By declaring a war an administration gets to mobilize public opinion and to insert all sorts of policies that without the declaration would be subject to closer scrutiny. Announcing a grave threat and declaring war congeals the fractures of opinion in times of war in the smothering embrace of patriotic fervor. The popular political response is the reinforcement of patriotic sentiment rather than critical engagement. In the lead-up to the invasion, a public relations exercise was unleashed. Cheney kept appearing on television with the story that Iraq was an imminent threat. Iraq was characterized as a grave and growing

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danger with the capacity to bomb the United States. And to ratchet the threat it was stated that it would be just 45 minutes from the order to attack before the bombs fell on the United States. In 2003 Rice spoke of a smoking gun turning into a mushroom cloud. Alternative interpretations from the CIA were stifled. Reporters, such as The New York Times ’ Judith Miller, used dubious evidence to claim weapons of mass destruction. The neoconservative establishment in Washington feted Chalabi. In a dereliction of their social duty and national responsibility, the serious press, including The New York Times and The Washington Post, simply repeated rather than questioned the assertions of the warmongers.11 The CIA director George Tenet, after some resistance, also drank the administration’s Kool Aid. The evidence was still weak. When Tenet presented the evidence to the president in December 2002, Bush asked, “Is this all we got?” The reply was the infamous remark by Tenet that it was a “slam-dunk.” In February 2003, with Tenet sitting behind him in full camera view, the most popular member of the Bush cabinet, Colin Powell, made the claim in the United Nations that Iraq had chemical weapons and weapons of mass destruction. The “evidence” was entirely bogus. On March 19, 2003, President Bush authorized the attack on Iraq. US troops and the coalition of the willing allies invaded Iraq for reasons that were spurious and based on doctored evidence. By doctored, I mean not that senior administration figures cooked some evidence but that they refused the evidence that was presented by the CIA and kept looking until they found the evidence that they wanted, albeit sketchy, unreliable, and ultimately false. And here we come to major strategic errors and tactical mistakes. The initial plan for the invasion of Iraq drawn up by the military envisioned an overwhelming force of 500,000 troops. The State Department also drew up detailed plans for a newly liberated Iraq. Rumsfeld resisted both plans. He countered with a plan for a light striking force of only 75,000 troops. The final plan was a hybrid of 140,000 troops, enough to defeat easily the Iraqi Army but not enough to control a large country. The State Department’s detailed and meticulous plans were never realized as Rumsfeld’s Defense Departmenttook the lead in governing a post-invasion Iraq through a series of ad hoc and misguided decisions. After an initial shock and awe of sustained bombing, the invasion routed the Iraqi armed forces inside three weeks. On May 1, the president flew in an aircraft carrier off the coast of California. As he spoke to the assembled sailors and airmen on the deck of the carrier, behind

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him was a banner, strategically located for maximum television exposure, which proclaimed “Mission Accomplished.” Mounting mistakes soon followed the invasion. With not enough troops to secure the vast country and unsure of their role, the US military stood by in the face of determined and widespread looting. In Baghdad less than two combat brigades of around 7000 troops in total were only in partial control of a city of at least 5 million people. The looting soon spiraled into lawlessness and ultimately into the insurgency. Unable to hand over power to an unpopular and largely unknown and certainly not trusted Chalabi (the only person who believed his claims was Paul Wolfowitz), the United States had created a power vacuum. In the first three months after the invasion, looting and lawlessness became routine. Baghdad burned for a month. The everyday security of Iraqis was compromised as lawlessness and criminality took hold while the US military looked on. The National Library and its ancient manuscripts went up in flames. Priceless 7000-year-old treasures of the National Museum were stolen. Martial law was not declared even as caches of arms were raided and national treasure was looted. The country slid quickly into anarchy. The initial Iraqi support for the US invasion and toppling of Hussein soon evaporated as living conditions worsened and social order collapsed. Things worsened when the US military began mass roundups of Iraqi men of military age. This was in part driven by a need for intelligence to find the phantom WMD and then as the insurgency worsened to get evidence on insurgents. The brutalizing effects of these mass arrests and home invasions as well as of families losing their wage earners turned the people against the US occupation. There were many other blunders and gaffes. Although the State Department had crafted meticulous post-invasion plans, it had for example, a plan for securing 20 important sites in Baghdad, including the National Library and Museum, Rumsfeld’s Defense Department took over control and ignored the State Department. They had no plans; so, when the initial goal of a quick victory followed by a quick exit was untenable, there was no backup plan. They floundered in a series of disastrous ad hoc decisions made by those with no experience of Iraq, the Middle East, or of postwar reconstruction. Just before the invasion, Rumsfeld effectively sacked the Army’s chief of staff, General Shinseki, who had direct experience of post-conflict reconstruction in postwar Yugoslavia, for suggesting troop levels in the hundreds of thousands, high enough to secure social order in the wake of the invasion. Even the military

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commanders on the ground were ignored. To fill the vacuum Paul L. Bremer was appointed as head of the newly established Coalition Provisional Authority (CPA) in May 2003. He became the de facto leader of the country. He had some experience in diplomacy, having served in the Foreign Service, but could not speak any Arabic and had little experience in the region. He was, however, a close personal friend of Scooter Libby and had worked for Kissinger Associates. He was a political appointment, his Republican credentials and connections more important than any specific skill set for the job at hand. Indeed, his lack of Arabic and his ignorance of Arab culture was a positive for Rumsfeld, who did not want State Department Arab specialists getting involved in the postwar construction; since they knew the region, they might not fully buy into the simple objective of remaking the country in an image of US democracy. Bremer made two monumental mistakes very soon after taking control. The first was the announcement of a policy of de Baathification. Membership of the ruling Baath party was almost obligatory under the Hussein regime, so most senior administrators were members of the party. The Baath Party included not only a small number of true believers but also a large majority of apolitical civil servants whose knowledge and experience were vital to maintaining a functioning civil society. These were the people who knew how to utilize the aging infrastructure so that the toilets flushed, and the taps spouted fresh water. These were midlevel technocrats, who had the institutional knowledge and expertise to run the country. Bremer’s unilateral policy announcement put 50,000 such people out of work, effectively rendering them unemployable. With a stroke of his pro-consul pen Bremer marginalized the administrators with vital knowledge of civil society and created a solid basis for opposition to US rule. Chalabi was put in charge of the policy and he used it to settle old scores and promote his own agenda. In the place of these longserving knowledgeable people the CPA employed young people fresh from America with no real expertise but solid Republican connections. In his hilarious but ultimately deeply distressing book Imperial Life in the Emerald City: Inside Iraq’s Green Zone, Washington Post correspondent Rajiv Chandrasekaran describes the Green Zone, the CPA headquarters, as a bubble of privilege inside a city that was disintegrating. Quixotic neoconservative policies unsuited to conditions in Iraq were tried and failed. He details the case of the “twenty somethings” with no experience in finance put in charge of creating a stock market. One Georgetown

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professor was surprised to see one of his only recently graduated students in the Green Zone. With no experience she had been put in charge of traffic planning for the entire city. Few spoke Arabic or had any knowledge of the city, the country, the Middle East, or postwar reconstruction. They were Republican hacks. In the CPA’s brief life—it lasted little more than year—its one resounding success was in alienating most of the Iraqi population.12 The second major mistake was Bremer’s decision to disband the Iraqi Army. This act marginalized 400,000-armed soldiers just as the former army leadership was bringing them back into possible service. The decision was ill-fated because it left almost a half million people unemployed. It alienated those who could have provided basic security, and it cast into the streets people with military expertise and guns. Bremer’s policies essentially marginalized the Sunnis, undercut the basis for immediate and effective postwar reconstruction, and provided a rich recruiting base for anti-American forces. It was less than a week after Bremer’s order to dissolve the Iraqi Army before the first insurgency attack was launched. After that, it was downhill all the way as the insurgency increased its attack on US soldiers, and sectarian differences ruptured into a bloody conflict. The fatalities began to climb as the insurgency took hold. In 2003 there were 486 US troop casualties and 7297 Iraqi civilian deaths. By 2004 the respective numbers climbed to 846 and 16,801. In 2006 the respective figures were 821 and 35,452. The US occupation rid the country of a dictator but produced anarchy, social disruption, and mass fatalities. Through its actions the United States had instigated an insurgency that wrought death and destruction in the country. Rather than democracy, anarchy emerged. US power was not burnished in Iraq but soiled, and the United States was not made safer but more vulnerable as the occupation generated increased support from radical and radicalized Islamicists. The occupation generated anti-US feelings and nurtured the very terrorist groups that the invasion was supposed to smash. When no WMD were found because there were none and the images of Abu Ghraib were broadcast, the full depths of the fiasco were revealed. For four years Iraq was pitched into the darkness of sectarian violence, insurgency, and anarchy. By 2007 the worst of the chaos was coming to an end. Sunni tribal leaders began to cooperate with the US forces; Shiite leaders successfully restrained the Mahdi Army and a change in military strategy led to the surge of US troops. More US troops embedded within local communities rather than isolated in large US-only bases helped tame

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the insurgency. In 2009 Iraqi casualties declined to 3000 and 140 US personnel were killed. On August 30, 2010, President Obama announced that the combat mission in Iraq had come to an end. The war was over. All US combat troops were pulled out of Iraq by the end of 2011. That only signaled a new era of chaos in Iraq as former military men combined with Sunni extremists to create, at least for a brief though bloody period, an Islamic state in northwest Iraq. As Syria collapsed and Iraq fell into sectarian strife, the region became the site of more conflict, death and destruction. How do we assess the war in Iraq? On some levels it was a success. A dictator was toppled. Few are sorry to see the end of the Hussein regime. He was a brutal dictator who had committed crimes against his own people. An unfriendly noncollaborative elite was removed and after some time more collaborative elites were installed, albeit precariously, at the head of a country capable of reerupting in sectarian tensions and outright violence. The US Empire was extended. The United States now had military bases in Afghanistan and for a while also in Kyrgyzstan, Tajikistan, and Uzbekistan. In the wake of 9/11, the United States now has a larger and more permanent military presence in the Middle East and Central Asia. It is by such increments that a global empire is extended and enlarged. But, at what cost? Trillions of dollars were spent, lives were lost and bodies and souls permanently damaged.13 There is the issue of illegitimacy that dogs the entire campaign. Since there were no WMD and no direct link between Al Qaeda and Hussein’s regime, the invasion was founded on half-truths at best and in all likelihood downright lies by senior members of the Bush administration. In moral terms it is a disgrace. It made it difficult for US allies to sign up so willingly or so easily in the future for US-backed missions. Global public opinion turned against the United States. The war in Iraq transformed the global outpouring of sympathy and solidarity expressed in the immediate wake of 9/11 into a cynical disbelief in US intentions and goals. The appalling violence during the height of the insurgency gave sustenance to anti-US terrorist forces. The war in Iraq increased recruiting for terrorists. On most levels, the war was a disaster. Hussein could have been toppled by greater encouragement of anti-Hussein elements inside the country. The sanctions were taking their toll and eventually would undermine his legitimacy. He could have been deposed without the war. The war achieved his removal but at a huge cost. From March 2003 to

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December 2009 around 110,000 civilians were killed, millions displaced, and mass violence was visited upon an entire country of over 31 million people. The United States promised Iraqis freedom but gave them anarchy, guaranteed democracy but generated sectarian violence, pledged peace but caused mass deaths. The US military was severely stretched, while the emphasis on Iraq allowed the Taliban to recover in Afghanistan, and the invasion never did lead to the death or capture of senior Al Qaeda figures. Osama bin Laden was killed not because of the invasion of Iraq but despite it. The US invasion of Iraq created chaos and death.

The Structural Flaws of Empire We can distinguish between tactical mistakes and strategic flaws that reveal deep stress fractures. Tactical flaws are operational mistakes that include the inadequate troop levels committed to the invasion of Iraq, the debacle of post-invasion plans by the Department of Defense, the blunders of the CPA, and the horrendous mistakes made by Paul Bremer. These mistakes reveal incompetence. The war also revealed deeper structural flaws. The first is the very existence of the US Empire. Part cause and part effect of the huge military power of Empire is the tendency for global events to be interpreted, understood, and responded to in military terms. The United States with its vast military power is like someone who carries around a giant hammer. They look for nails and bash everything even remotely resembling a nail. It is in the nature of the imperial posture: the tendency to respond on the grand scale with the military “solution” always there just waiting to be mobilized and deployed. The Empire needs its animus. Real or imagined, actual or inflated, empires need their enemies and their bogeymen. Otherwise, why all the hardware? Much is made of the difficulty in fighting against terrorism. Analysts speak of the asymmetry between superpowers on the one hand with a vast, yet slow-moving military arsenal against non-state terrorist groups on the other, small, nimble, focused, and secret. But the asymmetry is not a fact of nature. Try dropping the big hammer and try a smaller hammer. And maybe it is not even a nail you are dealing with. A flexible imagination is needed as much as military hardware. But the US Empire is predisposed toward seeing the world from the perspective of wielding a big hammer that searches only for a nail. The 9/11 attack could have been treated as an issue of law enforcement: “a dreadful crime was committed; let us

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bring the criminals to justice,” could have been a legitimate and appropriate policy objective. Too easily, the military solution, the declaration of war, continues to be employed. At a dinner in 2008 the secretary of defense, Robert Gates, a Republican, warned of the creeping militarization of US foreign policy. He counseled that the military should have a more supporting than leading role to civilian agencies.14 Even the conservative columnist George Will wrote, “the more we couch our thinking in military categories, the more we open ourselves to misadventures.”15 One argument is that the US foreign policy was hijacked during the Bush administration by neoconservatives with their vision of remaking the Middle East and their policy of projecting US power through preemptive strikes. Even if this assertion is true, then the deeper question is, why is it so relatively easy to get the United States to go to war. There was popular resistance, but finally the country did go to war. Congress gave Bush the authority to declare war and initiate a preemptive strike against a country that was not a direct threat to the United States. A willing Congress, supportive press, and a persuadable public are all part of the unfolding drama of Empire. In the superheated environment post 9/11 it was relatively simple to get the United States to go to war with evidence that was neither compelling nor, as it happens, actually true. The simple conclusion and most threatening structural flaw are that the United States, because of Empire, goes to war too easily and too often. And once war happens, lots of things can and do go wrong. It is the very nature of war. There have been numerous military involvements around the world since the establishment of Empire. Not only wars such as the Korean War, but also the Vietnam War (1964–1973) and the Persian Gulf (1991). In smaller campaigns from 1980 to the present the US sent troops into the Dominican Republic in 1965, Cambodia in 1970, El Salvador in 1981, Lebanon in 1982, Grenada in 1983, Panama in 1988, Somalia in 1992–1994, Haiti in 1994, Macedonia in 2001, and Haiti (again) in 2004–2005. There were also numerous airstrikes and “advisors” employed around the world. The very existence of Empire is the biggest stress fracture revealed by the Iraq War. Some make the case now in hindsight that the mistakes of the Iraq War do not undermine the global posture of the United States. Iraq is a unique case, they argue, that does not constitute a general argument. This temporary hijacking of US foreign policy meant that US force was used for ends that were uncertain by means that were flawed. With better goals and better implementation, Empire becomes more acceptable. If

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the policy is more tightly connected to immediate material interests—the realist position—or if the ends are more noble—the idealist position— then Empire works better. For the idealists, the failure of the United States to stop genocide in Yugoslavia or Rwanda is often cited as an example of what happens when the United States does not intervene in mass killings. In this interpretation, US power can be used to stop evil. This is the Empire as a force for good. Of course, realism and idealism are rarely such clear-cut positions and at times they alternate as major chords; after the Rwandan massacres were made more public the United States reflected a more idealist strain; after the debacle of Iraq the realism was more dominant. And yet both start from an imperial posture; both see US power projected around the world. While they differ in their aims and objectives, the underlying sense of global reach is apparent. The curse of Empire even lasted beyond the US deployment of troops in Iraq. Troops were sent to Afghanistan to fight against the Taliban, prop up erstwhile Afghan allies and continue the War on Terror. The War in Afghanistan lasted from 2001 to the present. At its peak, there were 100,000 troops in Afghanistan. More than 100,000 people have been killed in the war including 31,000 civilians. As I write these lines, the Taliban control vast swathes of territory and a peace treaty will soon be signed between the United States and the Taliban. The Taliban were in power before the death and destruction of the war and will likely return to power. The journalist Rajiv Chandrasekaran who provided such a devastating account of the CPA in Iraq turned his attention to the war in Afghanistan. Nothing it seems had been learned from the failures of Iraq. He notes, Too few generals recognized that surging forces could be counterproductive, that the presence of more foreign troops in the Pashtun heartland would be a potent recruiting tool for the Taliban. Too few soldiers were ordered to leave their air-conditioned bases…Too few diplomats invested the effort to understand the languages and cultures of the places in which they were stationed. Too few development experts were interested in anything other than making a buck. Too few officials in Washington were willing to assume the risks necessary to forge a lasting peace…The good war had turned bad.16

One argument is that, despite all the costs and mistakes, the US Empire is necessary. In a world of uncertainty and change, Empire secures order.

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The fact of massive military power allows the United States to maintain global connectivity, extend the flattening space of economic globalization, protect US interests, and be a force of good in the face of obvious evil. If the US abdicates Empire, a power vacuum is created that will be filled by the strong and the bad. Evil will flourish. We will become bystanders to genocide, impotent in the face of evil. This argument is not without merit. Naïve criticisms of Empire tend to undercount the important role of Empire in sustaining global order. The United States can and does at times secure relative peace around the world. But a world without US global military hegemony need not be a world of insecurity and chaos. The costs of Empire are too great for the United States. It is time to share the load of maintaining global security. Defenders of Empire—a term rarely used, more often it is “US interests” or sometimes globalized to “world security”— ignore the regressive effects of maintaining a global order filled with authoritarian regimes and repressive governments. To be precise my argument is not that the United States should play no major role in the world. It is the prioritization of US military power that is the issue. US primacy can be maintained through greater use of soft power and greater reliance on alliances and collaborations. We live in a world where US power is important, yet its military power should be reduced. Empire is just too costly, especially for the people of the United States, who have to provide the finance and personnel. A second and related flaw revealed by the War on Terror is that the tendency toward war solutions, the big-hammer approach, short-circuits debates and criticism. Wars are elemental. They stifle criticism. Perhaps that is why not only the practice but also the rhetoric of war is so constantly employed in US domestic policy: The War on Crime, The War on Drugs, The War on Poverty. The words are neither accidental nor innocent. War is invoked because it is difficult normally to get the government to do things. The Founding Fathers were leery of concentrated government power, so they spread it across different branches and divided it between states and the federal government. The system is designed to support the status quo and not for the government to be an active agent. The evocation of a permanent threat and the declaration of war give the necessary justification and generate support for large-scale government action. And there is no more concentrated government action than the prosecution of wars. Declaring wars are vehicles for mobilization that have the added

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advantage of stifling criticism and legitimizing dissent. The loose and fragmented nature of US political organization makes war one of the few ways that governments can get big things done. War works against democratic debate and serious criticism. Employing the rhetoric of war makes it easier to marginalize alternatives and demonize critics. Other flaws radiate out, like cracks in fractured glass, from the military posture of Empire and the relative ease of war declaration. There is the fiscal crisis of Empire. The total direct costs of the Iraq War are estimated at around $3 trillion. Then there are the indirect costs. Before the War on Terror, in January 2001, the Congressional Budget Officewas predicting budget surpluses into the future. After a decade of tax cuts and two wars, the budget surplus of $2 trillion turned into an annual deficit of $12 trillion. The War on Terror and subsequent tax cuts cramped other forms of government spending. Empire comes at a huge price. The United States is running up against the fiscal limits of Empire. Some deny these limits. Defense spending is sacrosanct for many in Congress. The real costs are often hidden by off the book accounting and passing the costs on to future generations in the form of borrowing now and paying later. The costs of Empire are unrelated to the threats we face. Costs increase despite, not because of, the threat levels. We spend more on defense now than we did when facing an existential threat from the Soviet Union. One way to make the costs of Empire more transparent is to tax wars as they are being waged. If the country goes to war, there has to be some form of sacrifice to those prosecuting the war. If new taxes were levied immediately with every military intervention to cover the current and long-term costs, then perhaps support for Empire would wither. Perhaps when Empire seems less a costless exercise in US military strength and more what it is, an expending of national treasure, it will lose such uncritical support. In his farewell speech, President Eisenhower spoke of the grave implications of the military–industrial complex. If the citizenry were made more aware of the grave fiscal implications, then perhaps Empire would shrink in size and scope. Then there is what I will term the rationality crisis of Empire. An obvious question to ask of US conduct in the Iraq War was why so many mistakes such as incorrect troop levels, lack of precise objectives, poor strategy, and failed tactics. It took nearly seven years from the invasion before the insurgency was brought under some form of control. There were plenty of reasons: Rumsfeld’s arrogance and Bremer’s dumb decision to disband the Army, among others. There was no end of arrogance

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veiling incompetence and overlying ignorance. Yet there is a deeper issue of rationality crisis. Imperial forays require lots of decisions made quickly. And there are limits to the number of right and timely decisions that can be made in the unforgiving, brutal, and confusing and confounding real time of war. A telling event: at the very start of the Iraq War two F-117A stealth fighters dropped four specially designed bunker busting 2000 lb. bombs on Dora Farms in Baghdad. They were smart bombs designed to kill Hussein. Much had been made of smart bombs and their precise targeting to avert the random killing of innocents. In fact, Hussein had not visited the area since 1995. No Iraqi leadership was killed. But the attack killed at least one civilian and injured 14 others, including women and children. There was no secret bunker: the information was suspect, and the implementation flawed. Why all the mistakes? In a general sense waging a war means centralizing knowledge and information using a hierarchical structure to gather and process information. The military structure tends to be long on discipline and obeying orders, rather shorter on debating alternatives and assessing different scenarios. Maybe before the war starts but particularly once it gets going, plans made at base unfold despite the changing reality on the ground. Mistakes and errors are endemic to war. But then there is the particular rationality crisis of the US Empire, which is prone to what Derek Leebaert describes as “magical thinking,” the recurring self-deception that the United States can successfully influence outcomes in other countries.17 The belief that the United States because it is the United States can set the world to right is a recurring feature of US foreign policy from Korea, though Vietnam to Iraq. The magical thinking is reinforced by a lack of knowledge of other countries and the nature of local elites. Strategists of the Vietnam War had no experience of Vietnam and the senior leadership of the Iraq War prided themselves in their inability to speak Arabic let alone understand the intricacies of Iraqi society. No, in the land of magical thinking the rest of the world just wants to be like the United States. It stems from a belief that the United States is the obvious endpoint of social development, political striving, and social progress. Other countries just have to be guided toward the inevitable goal. Ambrose Bierce’s remark, that war is God’s way of teaching Americans geography can be extended to another lesson: not everywhere is an embryonic United States, a proto-US, awaiting birth.

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In Iraq the elevated level of magical thinking was embodied in Cheney’s promise that the United States would be treated as liberators and the military would leave in two months. In fact, in a June 7, 2004, internal memo to the undersecretary of defense for policy, Douglas Feith, listed things that did go wrong: Iraq descended into chaos, mass Iraqi casualties, large number of internally displaced people and international refugees, widespread vigilante justice, destruction of Shi’a holy sites, and a dramatic surge in terrorist recruiting.18 The memo was written before the full fiasco unfolded. On the ground the complex cultures with convoluted history and varied social geographies governed by local elites make difficult the easy projection of US power. The particularities of place undermine the simple projection of Empire intentions. The world is complex, yet Empire sees simplicity and assumes plasticity to US power. Peter Beinart writes of the Icarus syndrome. Icarus, if you recall, in Greek mythology was an arrogant young man who flew too close to the sun, melting the wax that held together his feathered wings, and fell to the earth. Beinart describes the policy of Empire as one of hubris. The beliefs in the power of rationality, the power of a firm stance, and the power of dominance have all at one time or another become inflexible dogmas that led to failure if not disaster.19 There is something more than just the incompetence of the Bush administration. There is a rationality flaw right at the heart of Empire. And it shows no sign of disappearing. The war in Afghanistan was a fantasy of nation building in a dysfunctional nation with a corrupt governing elite. On the ground, this creates a gap between rhetoric and reality. Long-term observers of US foreign policy see the same structural defects revealed again and again. The policies of Empire are magical fantasies that lead to disappointment. At times the fantasies are revealed for what they are, and a clearheaded rationality takes hold. The Powell Doctrine, for example, is one of the most sustained considerations of using US power. The term was employed by a journalist but is associated with Colin Powell in the runup to the 1990–1991 Gulf War. It calls for some fundamental questions of the military: Is there a vital national security threat, a clear objective, a full assessment of cost and benefits, exhaustion of all other nonviolent means, an exit strategy, popular support, and international agreement? And if after all this the military is involved, then use overwhelming force to ensure victory. Go big, go long, or go home.

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In his final address to the nation made to a national television audience on the evening of January 17, 1961, President Eisenhower warned his fellow Americans that “only an alert and knowledgeable citizenship can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.” The American Empire has grown not because of the popular will of the United States, but often despite it. A necessary step is to heed Eisenhower’s call for an alert and knowledgeable citizenship. Only through an honest assessment of costs and benefits and a precise accounting of who pays and who benefits, and an inclusive and transparent public debate can the limits to Empire be set. We need a wider debate and fuller understanding of the structural flaws of Empire and their ability to enmesh, corrupt, and undermine the United States.

A Lesson Learned? The War on Terror, even according to a publication of the US Army War College was too expensive and ineffective.20 Was a lesson learned? Was the stress test so great that it invoked a change? The fiasco of Iraq and the costs of the Long War did exact a toll on the commitment to Empire and inaugurated major political shifts. During the debacle of Iraq, the 2007 presidential campaign pitted a young senator, with little political experience in Washington but who had voted against the invasion of Iraq, against a Navy veteran, a seasoned senator and longtime supporter of military interventions. Obama’s victory over McCain marked a shift in popular commitment to Empire. But, despite a new President with a new mandate, the Long War continued. Although Obama’s presidency promised to pull back troops, in 2009 he ordered a surge of 17,000 US troops to the 36,000 troops already there. Empire still held its sway. There was a change in tactics. With the long-term deployment of US military overseas increasingly unpopular, there was a shift to drone strikes, air attacks, and proxy wars fought through allies on the ground. The tactical change came with its own set of problems. Air strikes killed the innocent as well as the combatants, further alienating local populations, and allies on the ground could be fickle, unreliable, or just too brutal. So, Empire remained but shifted its sphere of operations from ground troops to air strikes. But the continual deployment of personnel overseas still sapped support for Empire.

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In 2015, Donald Trump won the presidential election. It was a stunning upset, as most believed that Hilary Clinton would win. Trump ran on a populist nationalism that criticized former trade deals, the commitment to economic globalization and “lax” immigration policies. There was also talk about ending the era of endless wars. In his speech to the graduating class of West Point on June 13, 2020, President Trump said, We are ending the era of endless wars. In its place is a renewed, clear-eyed focus on defending America’s vital interests. It is not the duty of U.S. troops to solve ancient conflicts in faraway lands that many people have never even heard of. We are not the policemen of the world.21

In the very same speech, he also defended the global role of the US military to secure, “The survival of America and the endurance of civilization.” Despite the rhetoric, Trump, still committed US resources to foreign campaigns. Soon after entering the White House he ordered air strikes in Syria and a major bombing attack in Afghanistan in 2018 and 2019. There is a growing and profound criticism of Empire and its failed wars and debilitating engagements, described by one writer as a series of small wars in obscure places that lack strategic significance.22 The influential journal Foreign Affairs published a special issue in 2019 entitled Searching for A Strategy.23 It took as granted the fact that “U.S. hard power is in relative decline; U.S. soft power has taken a huge hit” and “the managers of the empire need to wake up.” A more radical grand strategy of restraint has also been proposed.24 The broad contours of the argument are that the United States faces limited threats because of its geographical position, so international alliances are not needed, and the military should be drastically downsized. In effect, it is a call for US foreign policy unfettered from Empire. The proponents of restraint argue that extensive alliances come with real costs of entanglement and possibility of entrapment, that pursuit of primacy is too costly and not all that effective in reducing arms proliferation or encouraging democracy. After almost two decades of futile wars, the idea of pursuing a strategy of restraint appeals to more people in the United States. But it will take more than sophisticated, even correct, arguments to shift the grand strategy of the United States toward a strategy of restraint. Like a giant oil tanker plowing through the oceans, US policy cannot change direction easily or quickly. There is too much momentum. Yet

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a near-future shift is palpable. Decades of failed wars have moved public opinion toward a willingness to countenance a profound shift in geopolitical strategy, which since the 1950s, apart from the Vietnam War, has had a life of its own separated from popular public opinion, subject to debate only within the political elites. The new normal is that foreign policy, for now at least, is much more dependent on domestic opinion. The US Empire is at a crossroads. On the one hand, there are powerful forces for its continuation. A new shadow has been identified. This time around it is phrased as standing up to a resurgent China to enforce a rules-based order against a Sinocentric world. Then there is always the vast military–industrial security complex that feeds out of the trough of Empire. They will not willingly enter political and economic oblivion. They have identified a new threat that China poses a threat to US global hegemony and US interests. On the other hand, backlash to Empire is mounting. Whether changing tactics from deployment of land troops to air strikes and drone attacks can maintain Empire while also resisting domestic and foreign criticism is a moot point. The Greek historian Thucydides, writing around 2500 years ago, made two observations that still have relevance for the contemporary US. The first is the well-known Thucydides Trap, often employed to describe US–China relations, which states that when an existing power is threatened by rising power it has two options. If it does nothing, it risks the competitor becoming stronger, hastening a confrontation. If it confronts, it creates the conditions for war. Thucydides is now widely quoted when analysts assess the possible trajectory of US–China relations. While some see a negotiated settlement, many see conflict as the inevitable result. But Thucydides also made another pertinent, though less well-known comment. “Your empire is now like a tyranny: it may have been wrong to take it; it is certainly dangerous to let it go.”

Notes 1. Yergin, D. (1978). Shattered peace: The origins of the cold war and the national security state (p. 220). Houghton Mifflin; second quote p. 245. 2. There were imperial ambitions at the very birth of the Republic. I detailed the early rise to Empire in the first edition of this book. 3. Cumings. B. (2010). The Korean war: A history (p. 210). Modern Library.

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4. Overseas Base Realignment and Closure Coalition. (2018). U.S. military bases overseas. https://www.overseasbases.net/uploads/5/7/1/ 7/57170837/fact_sheet_on_overseas_bases_2018_11_27.pdf. Accessed 7 Sept 2020. 5. See Eland, I. (2008). The empire has no clothes. The Independent Institute. Johnson, C. (2010). Dismantling the empire: America’s last best hope. Henry Holt. Johnson, C. (2010). Dismantling the empire: America’s last best hope. Henry Holt. Tomkins, E. B. (1970). Anti-imperialism in the United States: The great debate. University of Pennsylvania Press. 6. https://www.sipri.org/sites/default/files/2020-04/fs_2020_04_m ilex_0_0.pdf. Accessed 7 Sept 2020. 7. Quoted in The Washington Post, November 1, 2006, A1, A10. 8. Bacevich, A. (2010). Washington rules: America’s path to permanent war. Metropolitan Books. 9. Johnson, C. (2000). Blowback: The costs and consequences of American Empire. Henry Holt. 10. Mann, J. (2004). Rise of the Vulcans: The history of Bush’s war Cabinet. Viking Penguin. 11. Boehlert, E. (2006) Lapdogs: How the press rolled over for Bush. Free Press. 12. Chandrasekaran, R. (2007). Imperial life in the emerald city: Inside Iraq’s green zone. Knopf. 13. Baker, M. S. (2014). Casualties of the global war on terror and their future impact on health care and society: A looming public health crisis. Military Medicine, 179, 348–355. 14. US Global Leadership Meeting, July 15, 2008. 15. Will, G. (2011). The war that wasn’t. The Washington Post, May 3, A21. 16. Chandrasekaran, R. (2012). Little America: The war within the war for Afghanistan. Knopf. 17. Leebaert, D. (2010) Magic and Mayhem: The delusions of American foreign policy from Korea to Afghanistan. Simon and Schuster. 18. Cited in The Washington Post, April 13, 2011, A13. 19. Beinart, P. (2010). The Icarus syndrome: A history of American hubris. Harper. 20. Goepner, E. W. (2016). Measuring the effectiveness of America’s war on terror. Parameters, 46, 107–120. 21. https://www.whitehouse.gov/briefings-statements/remarks-presidenttrump-2020-united-states-military-academy-west-point-graduation-cer emony/. Accessed 10 Sept 2020. 22. Packer, G. (2019). The end of the American century: What the life of Richard Holbrooke tells us about the decay of Pax Americana. The Atlantic. https://www.theatlantic.com/magazine/archive/2019/ 05/george-packer-pax-americana-richard-holbrooke/586042/. Accessed 10 Sept 2020.

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23. Rose, G. (2019). Searching for a strategy: Four experts stage an intervention to rescue U.S. grand strategy. Foreign Affairs. https://www.foreig naffairs.com/articles/2019-04-16/searching-strategy. Accessed 10 Sept 2020. 24. Thrall, A. T., & Friedman, B. H. (Eds.). (2018). U.S. grand strategy in the 21st century: The case for restraint. Routledge.

Further Readings Bacevitch, A. J. (2016). America’s war for the Middle East: A military history. Random House. Bacevitch, A. J. (2020). The age of illusions: How America squandered its cold war victory. Metropolitan. Bapat, N. A. (2019). Monsters to destroy: Understanding the war on terror. Oxford University Press. Barnett, P. (2004). The Pentagon’s new map: War and peace in the twenty-first century. Putnam’s. Beinart, P. (2010). The Icarus syndrome: A history of American hubris. Harper. Bremmer, I. (2012). Every nation for itself: Winners and losers in a G-zero world. Penguin. Carroll, J. (2006). House of war: The Pentagon and the disastrous rise of American power. Houghton Mifflin. Chandrasekaran, R. (2007). Imperial life in the emerald city: Inside Iraq’s green zone. Knopf. Chandrasekaran, R. (2012). Little America: The war within the war for Afghanistan. Knopf. Cohen, W. I. (2005). America’s failing empire. Blackwell. Coll, S. (2004). Ghost wars: The secret history of the CIA, Afghanistan, and Bin Laden, from the Soviet Invasion to September 10, 2011. Penguin. Draper, R. (2020). To start a war: How the Bush administration took America into Iraq. Penguin. Ferguson, N. (2004). Colossus: The rise and fall of the American Empire. Penguin. Holland, J. (2013). Selling the war on terror. Routledge. Hopkins, A. (2018). American Empire: A global history. Princeton University Press. Johnson, C. (2000). Blowback: The costs and consequences of American Empire. Metropolitan. Johnson, C. (2004). The sorrows of empire: Military, secrecy and the end of the republic. Henry Holt. Maddow, R. (2012). Drift: The unmooring of American military power. Crown.

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Mann, J. (2004). Rise of the Vulcans: The history of Bush’s war cabinet. Viking Penguin. Mayer, J. (2008). The dark side: The inside story of how the war on terror turned into a war on American ideals. Doubleday. Mazarr, M. (2012). The risks of ignoring strategic insolvency. The Washington Quarterly, 35, 7–22. Miller, M. J., & Stefanova, B. (Eds.). (2007). The war on terror in comparative perspective. Palgrave. Packer, G. (2005). The assassin’s gate: America in Iraq. Farrar, Straus and Giroux. Ricks, T. (2006). Fiasco: The American military adventure in Iraq. Penguin. Stewart, R., & Knaus, G. (2011). Can intervention work? W. W. Norton. Thrall, A. T., & Friedman, B. H. (Eds.). (2018). U.S. grand strategy in the 21st century: The case for restraint. Routledge. Wright, L. (2006). The looming tower: Al-Qaeda and the road to 9/11. Knopf.

CHAPTER 3

Hurricane Katrina, Infrastructure Deficit and the Costs of Climate Change

On Tuesday, August 23, 2005, a storm began to brew, approximately 300 miles off the south east coast of Florida, in an area of shallow warm ocean known as the Bahama Banks. As wind speeds were only 34 mph, it was classified as a tropical depression and given the prosaic name Tropical Depression Twelve, indicating its order in the 2005 storm season. Depressions often peter out. Tropical Depression Twelve did not. It moved west, growing in strength, picking up wind speed. At 11 a.m. on Wednesday, August 24, as wind speeds approached 40 mph, it was upgraded to the category of tropical storm and given the name Katrina. Tropical storm Katrina continued to move west toward the Florida coast, covering just over 300 miles of open sea in less than two days. On Thursday, August 25, as it reached the shoreline with a wind speed of over 73 mph, its status was upgraded to a hurricane. Hurricane Katrina quickly passed over the southernmost tip of Florida, showering the land with almost a foot of rain before moving into the Gulf of Mexico. Once there, it strengthened as it soaked up the warm water of the Gulf. By Friday, August 26, wind speeds reached over 100 mph, and the National Hurricane Center (NHC) in Miami, Florida, issued an advisory that upgraded Katrina to a Category 2 hurricane. At 4 p.m. that afternoon, the center warned that the storm could turn into a Category 3. “Walter, get ready,” was the personal warning delivered by Max Mayfield, head of the

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NHC, to Walter Maestri, who was in charge of emergency management in Jefferson Parish, Louisiana. He went on, “This could be the one.”1 Early the next day, Saturday, August 27, the storm picked up even more energy as it crossed over unusually warm water in the Gulf. At 11 p.m. the same day, wind speeds of 115 miles were recorded, and 12 hours later at 11 a.m. on Sunday, August 28, wind speeds exceeded 170 mph. Katrina was now a full-fledged Category 5 hurricane, capable of inflicting enormous damage and ferocious harm to whatever was in its path, which in this case was the city of New Orleans. At 6:10 a.m. the next morning, Monday, August 29, the hurricane made landfall. Wind speed had dipped slightly, although it was still at a destructive force of 145 mph. The resultant storm surge overwhelmed some of the levees that protected New Orleans. The first to go, at around 9 a.m., was the levee protecting the Lower Ninth Ward, the lowest-lying and poorest part of the city. Floodwaters soon reached up to 8 feet. By the afternoon, the 17th Street Canal was breached, and 20 percent of the city was under water. By the next day, 80 percent of the city was flooded, and an estimated 1000 people were killed, most of them drowned by the rapidly rising floodwater. Initially, the event was called a “natural disaster.” It is still described as such by those who designate it as the “nation’s costliest natural disaster.” There is no such thing as a natural disaster.2 To call something a natural disaster is to naturalize social outcomes. Extreme weather events become disasters through social arrangements, political structures, and economic systems. The disaster that befell New Orleans was not natural; it was neither inevitable nor unavoidable. It was the result of human actions. In this chapter I will identify four interconnected structural flaws revealed by the event. The first is the nature of human–environment relations that ignore the risk of obvious environmental hazards; the second is the decline of a belief in big government that leads to the infrastructure deficit; the third is the steady shift toward a small, noninterventionist government, which leads to the failure to respond in a disaster situation to the needs of the most vulnerable; the fourth is the lack of preparation for climate change. While the first is an essential feature of the United States since its inception, the other three are of more recent origin. When people build in a floodplain at the mouth of one of the world’s largest rivers in a well-known hurricane zone, they are taking a huge risk. But when they compound that risk with underfunding vital infrastructure and building it badly and then failing to provide adequate protection for

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the most vulnerable citizens, the result is not so much a natural disaster, it is a social indictment. Hurricane Katrina revealed the problems of environmental arrogance, infrastructure deficits, the socially regressive nature of disaster response and the blindness to the impacts of climate change.

Prometheus Unbound In the past 200 years, the human ability to control and affect nature has increased as a function of the increasing population, growing technological power, and rising affluence. As the population grows, it increases the human weight on the world. Advanced technology allows humans to radically alter the physical world. Rising affluence creates the expectation and need for environmental alterability. Increased weight of the human presence, more power, and greater expectations have led to a reorientation of our relationship with the physical world and is now seen less as a series of constraints than a set of opportunities. The physical world is reimagined less as something we have to work with than something we work on. There are obvious benefits from this increasing technological mastery. We are freed from the limits of the physical world when electricity allows us to cool our homes in summer and warm them in winter and enables us to read at night. The constraints of weather and night are overcome by technology. The friction of distance on our bodies is annihilated when autos extend the reach of our mobility. In two centuries, we have freed our lives and behaviors from many of the constraints that the physical world had imposed on our ancestors. This shift encourages a sense that we are in control: we can engineer our environment to free us from the limits of nature. The notion of technological solutions authorizing limitless expansion is particularly strong in the United States, a nation nurtured on ideas of endless growth and development. On the other hand, this shift in how we perceive and imagine the world may give us a false sense of our ability to manage the physical environment, and this becomes more pronounced as our actions create changes that we only dimly appreciate, let alone understand. Although these trends have escalated in recent years, the founding almost 300 years ago of New Orleans at the mouth of one of the world’s largest rivers that periodically floods in a region subject to destructive hurricanes demonstrates that acts of environmental hubris are nothing new in the United States. If one city, by virtue of its very location and existence, mocks and taunts its physical environment, it is New Orleans.

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New Orleans began as an Indian settlement, which then became a French trading outpost and eventually a major American city. Its growth along a flood-prone river was improbable. Native Americans had transformed the land over a period of 4000 years. Shell middens created small dry islands in the marsh and portages—short land routes between river systems and water bodies—that were discovered and exploited. After the French founded Quebec in 1602, they began to move along the inland waterways, lured in part by the prospect of controlling the fur trade. Traders, Jesuit priests, and functionaries traveled along the Mississippi river in search of pelts, converts, and allies. They sold liquor, metal tools, and blankets in return for fur, religious conversion, and political alliances against the English. In 1673 Louis Joliet, a fur trader, and Jacques Marquette, a Jesuit priest, canoed down the great river almost 700 miles as far south as Arkansas. Another explorer, Rene-Robert, Cavalier de La Salle, in charge of 40 French and Indians, paddled down the Mississippi. His party passed the previous limit reached by Joliet and Marquette, and by April 1682 they had reached the mouth of the river. On April 9 they planted a cross and raised the French standard to formally claim possession of the entire river basin. In 1718 a French merchant company founded the city of New Orleans. To build a trading city close to the mouth of the giant river meant confronting the watery geography of a giant delta, half marsh, half mud, and a spongy raft of shifting vegetation. The city was located on a natural levee of 120 miles from where the river flows into the Gulf of Mexico at a bend in the river close enough to Lake Pontchartrain to enable the portage of goods from the lake to the city. It was easier to ship goods to the lake and transport them to the city than to sail up the ever-shifting Mississippi river. The city was sited on a relatively high piece of land where French traders encamped close to a Native American trail. The city was named after the Duc of Orleans, who was regent and ruler of France in 1718. The French wanted to call the river the St. Louis, but the Native American name of Mississippi persists to this day. New Orleans was laid out as a rectangular grid of 44 blocks, with 11 blocks running alongside the river and four away from the river. The city was enclosed in fortifications. At the center block immediately facing the river was the open square of the Place d’Armes surrounded by government and religious buildings. This street pattern remains a distinctive feature of the French Quarter.

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The city grew slowly at first. A 1764 map of the city showed that onethird of the blocks were devoid of buildings. And even by the end of the eighteenth century not all the land in the city boundaries was occupied. It took some time before reality fulfilled the promise of the grid. Buildings were constructed initially out of wood, to be replaced as time and wealth accumulated by more substantial and permanent brick buildings, often faced by white or yellow stucco. Houses with large verandahs wrapped around the entire floor were built on pillars, a design that maximized air circulation in an oppressive climate. The low water table created difficulties in construction. In 1763 the city and the wider province of Louisiana changed hands. After France’s defeat in the Seven Years War (the French and Indian Wars, as they applied to North America), the city and territory changed from French to Spanish possession. The Spanish rebuilt the city after the destructive fires of 1788. The buildings of the so-called French Quarter are more of Spanish design than French. Spanish power in the region was short-lived. The territory was ceded back to the French in 1801, and then two years later it was included in the Louisiana Purchase by the United States. New Orleans became an American city. By 1825 the fortifications were pulled down, creating opportunities for the construction of broad boulevards. Canal Street, North Rampart Street, and Esplanade Avenue are sited along the wide locations of the early fortifications. As the city grew along the river, the long lots of plantations were subdivided into a grid-like pattern. The open square, broad streets, and the grid became distinctive features of the city’s morphology. The city grew first along the river and then north toward the lake. The city was strategically located in the developing nation. As settlers pushed west to the Mississippi and beyond, New Orleans was now at the mouth of a giant river basin that allowed trade to and from the recently colonized, vast, continental interior. Commodities from the interior were shipped down the river through the Port of New Orleans. Slaves, goods, and commodities were also shipped upriver. Steam power shrunk the distance within the giant basin, while economic growth increased the traffic along the river system. New Orleans was a pivotal hub in the evolving economic geography of an expanding nation. The city’s economic history is intertwined with issues of race and class. One year after it was developed as an outpost of a trading company in 1718, slaves arrived. It was one of the largest slave markets in a country supposedly founded on a declaration of human rights. It was the English

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Tory Samuel Johnson, however, who reminded contemporaries, “How is that we hear the loudest yelps for liberty among the drivers of negroes.” Frances Trollope, mother of the English novelist Anthony Trollope, also remarked in the 1820s of Americans, “you will see them with one hand hoisting the cap of liberty, and with the other flogging their slaves.” Foreign visitors easily detected the hypocrisy between the formal political pronouncements and the everyday realities. But in the South, raw commercial considerations trumped the finer political philosophies. The city grew with the developing trade in cotton and sugar, both industries built firmly on the inhuman bedrock of slave labor. The city was a major trans-shipment point for the goods and produce of the vast interior. It also acted as entrepot for the larger Caribbean region trading bananas and coffee. The city grew quickly and by 1840 it was rated the fourth-largest port in the world after London, Liverpool, and New York. It was one of the larger, more economically dynamic cities in the United States, growing quickly as sugar and cotton trade boomed and upriver the vast interior was transformed from prairie and forest to farm and factory. The Mississippi was filled with barges and ships moving goods up and down its course. The city was the main port for the continental United States. In the early nineteenth century, the city grew from around a population of 10,000 in 1800 to 102,193 in 1840, when it became the third-largest city in the nation, behind only New York and Baltimore in population size. From 1830 to 1860 it was one of the largest of a half dozen cities in the entire country and the single most important export center of the whole economy, with the largest slave market in the nation. The city was at its highest relative economic point on the eve of the Civil War. As rail replaced river traffic, the city no longer occupied such a strategic location. The coming of the railways tilted the economic gravity of the country away from New Orleans. Cities like Chicago became the epicenter of economic development and population growth. As the economic center of gravity shifted ever westward and as the economy transformed from being agriculture-based to a more manufacturingbased, New Orleans lost its prime position. Railroad cities such as Chicago grew to prominence and industrial cities such as Cleveland, Buffalo, and Pittsburgh all eclipsed the Crescent City. The city did not experience industrialization or the consequent development of a mass middle class. It began to take on the feeling of shabby gentility and the character of a city past its prime. New Orleans became a backwater in, what was until

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the 1970s, the wider economic backwater of the South. The city lost its competitive advantage and slipped down the rank of US cities. In 1860 it was the sixth-largest US city and with 168,675 residents more than 50 percent larger than Chicago. By 1900 it was ranked number 12 and by 1950 it was 16th. At the end of the twentieth century, it was the 31st, with a population of 484, 674.

Urban Political Ecology The city sits close to the mouth of one of the largest rivers in the world. The history of New Orleans is one of floods, responses to floods, and measures to avoid floods. When the snow melts in the upper regions of the vast river system and rainfall is heavier than usual, the river can flood its banks. The city was first constructed only months after a major flood, and ever since, floods have been an integral part of the city’s history. The city flooded in 1731 and 1752. In 1816 the city was flooded for a month. The flood of 1828 prompted the mandating of taxes to pay for levees. In 1849 the city was flooded for 48 days. The floods of 1850 resulted in the federal government paying for levees. The river had major floods in 1882, 1884, 1890, 1891, 1898, 1903, 1912, 1913, 1922, and 1927. One response was to build levees to keep the floodwater in check. The first four-foot levees were built in 1722. Even as the levees offered some protection, the threat of flooding never disappeared. If anything, it got worse as large-scale environmental change was wrought. As the amount of impermeable surface increased in both the city and throughout the entire Mississippi river basin, the risk of flooding increased. Every new parking lot and residential development reduced the gradual absorption properties of the more permeable surfaces and increased the likelihood of flooding even with less rainfall. Urbanization created a greater risk of flooding. And as the threat of flooding increased, the levees had to be strengthened and raised, which gave a sense of protection but made those behind the levees all the more vulnerable if the levees failed. Most of New Orleans is now below sea level. A system of pumps lifts runoff collected in storm sewers and culverts and pumps it over the levee wall toward the lake. At 15 feet above sea level, only the higher elevation Central Business District, the upmarket Garden District, and the French Quarter can escape even light flooding. The Mississippi River now flows through New Orleans as an elevated water highway at 10– 15 feet above sea level. Rainwater in the city has to be pumped out of

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the bowl of the city, and this leads to a steady sinking of the city further below sea level, reinforcing the effect of an enclosed bowl below sea level. In 1995 20 inches of rain fell in the city, overwhelming the pumping system and causing widespread flooding. Much of the city sits precariously below sea level, surrounded by levees that need continual maintenance and monitoring. The city is also located in a hurricane zone. The term “hurricane” derives from “Hurican” the Carib god of evil, who in turn was derived from a Mayan god, “Hurakan”, whose breath created great storms. Hurricanes are extreme forms of tropical cyclones that develop in oceans warmed by the sun. There are three types of tropical cyclones: depressions with wind speeds of less than 38 mph; storms where the wind kicks up to 73 mph; and more extreme tropical cyclones, called hurricanes in the Atlantic, where wind speeds surpass 73 mph. They are formed over oceans where sea surface temperatures (SST) reach above 81 F for at least a depth of 150 feet. They originate in a narrow band of ocean areas within 30 degrees on either side of the equator, where the closeness to the sun assures a steady supply of warm water. New Orleans is located 29 degrees north of the equator. This warm water is the source of the storm’s energy. When tropical cyclones move over land or into cooler places, they run out of the warm water that fuels the storm. Tropical cyclones have three forms of movement. The first is vertical. The sun’s rays heat the seawater and water vapor quickly rises. The water vapor condenses as it meets the cooler air temperatures at higher altitudes. The warm, moist updraft is the vertical heat engine of the storm. The condensation produces the latent heat that drives the system. Hurricanes are powerful yet delicate phenomena. They require steady wind speeds across their vertical plane. Large differences in wind speed at different altitudes, defined as wind shear, rip them apart. The second is lateral movement. Tropical cyclones are driven across the surface of the earth by prevailing winds. There are three main wind belts that move air from a high-pressure to a low-pressure area around the surface of the globe: the polar easterlies from 60 to 90 degrees latitude, the prevailing westerlies from 30 to 60 degrees, and the tropical easterlies, also called the trade winds, from 0 to 30 degrees. The directions refer to their origin; the polar easterlies move from east to west while the westerlies move from west to east. A hurricane emerging in the eastern Atlantic is driven west by the tropical easterlies and then, around 30 degrees north of the equator, it is driven north and east by the prevailing westerlies.

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There is also circular motion. The force of the earth’s rotational motion spins around large, moving air masses. This Coriolis force is responsible for the distinctive spinning-wheel form of tropical cyclones. Low-pressure systems, such as cyclones, rotate counterclockwise in the northern hemisphere and clockwise in the southern hemispheres. The reverse directions occur for high-pressure systems. The word “cyclone” comes from the Greek word for wheel. The center of the wheel is called the “eye,” a circular area of sinking cooler air that can range in diameter from 5 to 125 miles. It is an area of calm surrounded by fierce winds at the wall of the eye. When the eye passes over, it can bring a brief and unnerving patch of very calm weather between violent buffetings and lashing rains. Hurricanes come in a variety of forms. The Saffir-Simpson hurricane scale is a fivefold categorization based on wind speed. Category 1 has a wind speed of up to 95 mph and a storm surge above 4–5 feet. Category 3 has wind speeds of up to 130 mph and a storm surge up to 12 feet above normal. The highest and most destructive is category 5, with wind speeds greater than 155 mph and a storm surge more than 18 feet above normal; massive evacuation up to 10 miles from shoreline may be required. Hurricanes are given names. The naming of storms has a hazy history. One story traces it to Australian meteorologist, Clement Wragge, who worked for the Queensland state government in the late nineteenth century. He is reported to have given names to tropical cyclones with a particular penchant for choosing names of unpopular politicians. The practice died out with his retirement in 1902. In 1950 hurricanes were given names from the phonetic alphabet (Able, Baker, Charlie). In 1952 the US Weather Bureau switched to giving women’s names, and this persisted until 1979 when men’s names were added. The NHC, in association with the World Meteorological Office (WMO), uses six lists of 21 names, alternating male and female, which are used in a six-year rotation. In 2005 the list began with Arlene, Bret, Cindy, Dennis, Emily, Franklin, Gert, Harvey, Irene, and Jose. The 2005 hurricane season was particularly active, and by late August the list had run through to Jose. The next name on the list was Katrina. Hurricane Katrina is often represented as a “natural” disaster, the designation of “natural” effectively disconnecting it from a social origin. Like the tsunamis that hit the Pacific Ocean a little over nine months earlier, it is often described as natural in that its origin was unconnected to human action. An alternative reading is to place Katrina in a narrative

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of increasing human transformation of the world, global climate change, and environmental degradation. The evidence for global warming is now indisputable.3 The year 2005 was, at the time, one of the hottest on record, part of a 25-year trend of global warming. The data, based on 7200 weather stations worldwide, shows that the 2005 temperatures exceeded those of 1975 temperatures by a full Fahrenheit degree. Global average temperatures were 1.36 F above the average recorded in the period 1950 to 1980. There is now a strong body of scientific evidence that links increased hurricane activity to a rise in global warming.4 One of the consequences of global warming is an increase in SST. The average SST in the Caribbean is now 2 degrees above historic monthly maximums. Increasing SST is making hurricanes, and especially major hurricanes, more likely. The water is warmer and stays warmer for longer, thus effectively increasing the amount of fuel for hurricanes and the time available for hurricane formation. In 2005 the hurricane alley of the subtropical Atlantic was particularly warm, and the SST in the Bahama Banks that spawned Katrina were the warmest on record.5 A paper in Science, published at the same time as Hurricane Katrina hit the US mainland, noted that there was evidence of a marked increase in the occurrence of more severe hurricanes. The north Atlantic has had a marked increase in the frequency and intensity of hurricane activity since 1995.6 Mark Saunders and Adam Lea confirmed this finding. They link the increased hurricane activity in the Atlantic since 1995 to rising SST. Their analysis shows local sea surface warming was responsible for at least 40 percent of the increase in hurricane activity between 1996 and 2005 compared to the period 1950–2000.7 The scientific consensus is that “the overall trend in SSTs and tropical cyclone and hurricane numbers is substantially influenced by global warming.”8 Katrina occurred at a time of escalating storm activity. On average there are 8–10 storms in the Atlantic in the typical season. Since the mid1990s there has been an average of 15–16 a year and they are growing in intensity. In 2004 alone four big hurricanes—Charley, Frances, Ivan, and Jeanne— caused $42 billion worth of damage. Katrina was not a random event: it occurred in a particularly active season. The 2005 Atlantic hurricane season was up until then the longest and most severe on record. It began officially on June 9 when winds of the tropical storm Arlene reached speeds of 35 mph at 8 a.m. It only ended on December 8 when the wind speeds in the tropical storm Epsilon dipped below 35 mph at

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10 a.m. There were so many tropical storms that the 21 names designated for the season were quickly used up, and after Hurricane Wilma hit in October, Greek names had to be used beginning with Alpha, until Epsilon in December signaled an end to the longest hurricane season on record.9 Hurricanes are not unusual events. Geological evidence from lakebed sediments suggests that they have been a regular occurrence for at least 3000 years and probably much longer. They are an integral part of the environment of the Caribbean. They appear in Mayan hieroglyphics, and the NHC estimates at least 260 hurricanes have caused more than 25 deaths each year since the mid-eighteenth century. A rougher estimate, based on scattered written accounts, gives a figure of 467 storms that may have caused more than 25 deaths each since at least 1492. In 1609 a group of ships taking settlers from England to Virginia was caught in a hurricane and shipwrecked on the island of Bermuda. The reports of the misadventure were the inspiration for William Shakespeare’s The Tempest. At the very least 125,000 people have died as a result of Atlantic hurricanes in the past 500 years. The ancient Mayans built many of their settlements away from the coast; they knew about hurricanes and organized their settlements accordingly. Cities were built away from the dangers of the strandline. Nature was accommodated in human affairs, a due recognition of the power and intensity of storms and natural calamities. In contrast to the Mayans, we are building more of our settlements along the coast. Coastal properties and beach locations are prime sites attracting development and growth as populations and investments congregate close to the shoreline. Rather than conforming to natural systems, we take a more arrogant view that nature is to be subdued, controlled, and managed. And in large measure we have been extraordinarily successful. We have turned mangrove stands into beach resorts, swamps into cities, and strandlines into suburbs. Coastal development in hurricane zones is just one manifestation of a deeper and wider reorientation of people and nature. We do not accommodate nature; we taunt it by building along fault lines, placing developments on top of unstable mountains, and constructing cities in the middle of hurricane zones. We ignore our increased knowledge of predictable environmental hazards, accepting short-term benefits and discounting longer-term costs. It is not just myopic economics at work; it is the arrogant mindset that even when we know about storms and floods, we discount their impact. This arrogance is part of a deeper

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and wider sense that the environment is not something that we accommodate, but something we subdue. In part, it is a rational position. In the past 200 years, an environmental revolution has been brought about by science and technology. We have overcome many of the constraints imposed by the environment. Electricity turns night into day and air conditioning transforms humid hot air into cool dry air. We live in a human-modified environment. And as more people live in cities and get their food from the grocery store and their weather information from the television, the sense of the environment as a limiting factor gradually disappears. More of people’s time and environmental experience, especially in the rich world, is in the socially constructed environment of the home, the office, and the mall, where the weather is controlled, and temperatures are fixed. Weather patterns become an external event seen through the car window or on the television, and even hurricanes become an occasional inconvenience and not a determinant of settlement patterns. Whereas the Mayans listened to the voice of the environment, we ignore it. In the United States, not just blind arrogance is at work, but there is also a belief in the ability to shape the future and engineer the environment. Founded on subduing environmental limits and surviving environmental hazards, the United States has continued to display a buoyant optimism about the national ability to rule over nature. The notion of constraints or accommodations to environmental conditions smacks of defeat. The dominant national ideology is a will to power over the environment. The historical amnesia so necessary for such a forwardlooking nation combines with fantasies of constant upward progress. The response to environmental hazards is to build bigger and stronger and to engineer a solution rather than accommodate environmental limits and constraints. In few other societies is there such a relentlessly optimistic belief in the future and the ability to overcome environmental constraints and subdue environmental hazards. Even after great storms that reveal the immensity of natural forces and flimsiness of some of our constructs, a narrative of rebuilding bigger and better remains dominant. It is as if we perceive major storms as a gauntlet thrown down by the environment. Our community is destroyed but we will rebuild bigger and better. We will not be defeated. There is a sense of war in our relationship with the physical environment, an open defiance of its power, an unwillingness to bend the knee to accommodate its strength and revere its power. Storms do not cow us, they motivate us to rise up,

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and like a gambler in a desperate struggle with an adversary, we raise the stakes in a dangerous wager against nature’s strongest hand. Government policies also encouraged the dangerous wager. Federal and state outlays for disaster assistance and insurance effectively subsidize risky behaviors. The National Flood Insurance Program introduced in 1968 gave government-backed insurance to those living in areas liable to flooding. These flood insurance programs encouraged riskier behaviors by underwriting losses and subsidizing insurance premiums. Government insurance was a subsidy that discouraged proper risk assessment. Owners received both disaster aid and payment for insured losses. Much of the risk of building and living in an area liable to flooding was borne by the taxpayer and not the owner. More than one in three properties federally insured were repetitive loss properties that experienced two or more losses in a ten-year period. Average premiums for these properties are only about 35–40 percent of the true risk premium for these properties. Despite the subsidies, many owners did not opt for insurance and relied on government disaster aid. There are also marked distributional consequences of the program. While the costs were socialized, wealthy counties and owners of vacation homes disproportionally appropriated the benefits. The Gulf Coast states benefited enormously from the below-market insurance rates.10 The combination of insurance subsidies, disaster relief, and infrastructure investments meant that government policies underwrote the environmental wager along the Louisiana coast and along the Mississippi. Most hurricanes that develop in the Atlantic move west, first hitting the Caribbean islands or the coast of Florida. If they persist, most move north and east along the Carolina coast, eventually petering out in the colder waters of the Atlantic. A few hurricanes cross Florida or come up from the south into the Gulf of Mexico. Since 1960, 17 hurricanes have passed within a hundred miles of New Orleans. In August 1985, Hurricane Elena moved into the Gulf of Mexico, heading straight toward the city. On August 31 as wind speeds reached over 103 mph, the storm veered directly away from the city. As the city breathed a collective sigh of relief, the hurricane corkscrewed around itself, and on September 1 headed back toward the city. Wind speeds now reached 126 mph. The storm veered again toward the east and skirted well away from the city. In 1992 Hurricane Andrew wreaked havoc in Florida as wind speeds reached 120 mph and much of the town of Homestead was flattened. The hurricane moved across the Florida peninsula, sweeping across the Gulf, but

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by the time it reached close to New Orleans wind speeds dropped, and the storm veered to the south and west of the city. Hurricane George in September 1998 reached wind speeds of 110 mph as it passed over Puerto Rico, but by the time it had crossed the Gulf and moved toward New Orleans, wind speed declined to 57 mph. By the time Hurricane Isidore reached close to New Orleans in September 2003, wind speed fell to 63 mph, and it was downgraded to the status of a tropical storm. Hurricanes mete most of their devastation on islands in the Caribbean and along the Florida and Carolina coasts. New Orleans is in the zone of hurricane activity, but the city has been lucky. Hurricanes have either petered out or passed too far away to cause much harm. While people in New Orleans were aware of hurricanes, and the weather department regularly sounded out hurricane warnings, they had caused no major damage to the city in living memory. Storms had either lessened or passed too far from the city to cause much damage. For the people of New Orleans, hurricanes were no big deal. And here we encounter a paradox of increasing likelihood of an extreme event with the declining public awareness of it happening. Major hurricanes are extreme events that will take place at some point. The longer they do not occur, and the more complacent people become, the more likely it is that they will occur with grave consequences. Imagine an event that will take place, on average, once every 100 years. As time passes and the event does not happen, the more you are likely to forget about it or ignore it. We believe tomorrow is going to be much like today and yesterday. Concern about an extreme event that does not materialize often deteriorates—right up until the event happens. As if locating a city below sea level in a flood-prone hurricane zone was not enough, there were also long-term and more recent environmental management decisions that not only ignored the ecological realities but also heightened the environmental risk. Marsh vegetation and swamp forests act as a buffer against the storm surges produced by the high winds of hurricanes. Every 3 miles of wetland reduces the storm surge by one foot. Hurricanes Audrey in 1957, Betsy in 1967, and Camille in 1969 did not wreak havoc further inland because of the wetlands buffer. However, since then climate change has raised sea levels, which progressively destroy this protective buffer of wetlands. The buffer has also been weakened by human engineering. The engineering of the Mississippi River, guiding it straight out to the Gulf of Mexico, has stopped the flow of sediment into the wetlands of

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the delta. Each year the giant river carries 400 million tons of sediment to its mouth. This nutrient-rich sediment was the basic building material and stabilizer of marshlands. The river was engineered so that sediment was directed straight out to sea and no longer formed the raw material of building the delta. Without the supply of sediment, the wetlands were made more vulnerable. Thousands of miles of canals were also cut into the wetland for navigation, oil, and gas extraction. As the wetland disappeared, the land sunk; the sea rose; and saltwater killed the plants, creating more open water. Well before the Katrina disaster, the threat to the city was obvious. “New Orleans is a disaster waiting to happen” was the basic message of an article in Scientific American in 2001 with the eerily prophetic title of “Drowning New Orleans.” The author noted that along the coast of Louisiana an acre of wetlands disappeared every 24 minutes, and at 25–30 square miles a year.11 Between 1930 and 2000 over a million acres disappeared. In 2002 The Times Picayune ran a series under the title “Washing Away.” A report, entitled No Time to Lose, also highlighted the crisis of coastal land loss.12 Despite these, and many other warnings, developers and politicians resisted the long-term ecological consequences and opted for short-term economic gains by allowing construction even in estuary waters. In 1997, to take just one example, Senator Trent Lott held up confirmation of an Environmental Protection Agency (EPA) appointment because he wanted the agency to fire someone who was “standing in the way of wetland permits needed for casinos.”13 The other US senator, David Vitter, held up legislation on levee upgrades and coastal restoration to insert provisions that enabled companies to log in cypress swamps. In 2004 the Bush administration rejected a restoration plan developed jointly by the state of Louisiana and the Army Corps of Engineers as too expensive. The loss of marshland increased the intensity of Katrina’s storm surge on the city. There was also the construction of the Mississippi River Gulf Outlet Canal, known as Mr. Go. The Army Corps of Engineers first built this navigation channel in 1965. It is a 122-mile channel originally 650 feet wide constructed to reduce the distance ships traveled between the Gulf and New Orleans and to make it easier for the bigger ships to sail into the city. It was never much of an economic success, but it was a major environmental mistake. The canal eroded its own banks and kept widening, eventually measuring 1750 feet wide. During Hurricane Katrina, it acted as a superhighway raising the storm surge three feet and channeling it all the way into the city to overwhelm the levees and floodwalls.

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If you build a city in a location prone to flooding and vulnerable to hurricanes, steadily reduce the natural protective buffer, and engineer a system that magnifies the destructive forces, then the disaster is not so natural. The “natural” disaster was more a social failure to build and adequately maintain the levee system. The first levees were built to protect the city against river floods rather than the occasional hurricane. Levee construction was initially a local responsibility, but in 1879 Congress created the Mississippi River Commission. The Army Corps, whose motto is “let us try,” was assigned the responsibility. Initially, they used a levee-only policy, a policy buttressed by the belief that keeping the river in check would scour the riverbed and so deepen the channel. The theory was elegant but incorrect, and floods persisted. Unable to meander across the river’s natural floodplain, the river’s energy was contained by the levees, but the damage was that much greater when the river did overflow its banks. The largest and most destructive was the great flood of 1927 that killed more than 1000 people. New Orleans was only spared because the bankers in the city persuaded the Corps to dynamite an upstream levee. Two entire parishes were flooded but the city remained dry.14 It would not be the last time that the Corps, dependent on Congressional approval and funding, aligned its policies and actions with powerful business interests. After the great flood of 1927, the levee-only policy was dropped, and the engineering of the river now included spillways and reservoirs to be used in the event of severe flooding. The levees were built to protect against an 800-year flood event. When Hurricane Betsy hit the city in 1965, approximately 70 people died as the city flooded. Attention now shifted to hurricane protection, but with a lower risk assessment; the level of protection was based on a fast-moving Category 3 storm every 200 years. It was the barest minimum protection for the city. The Corps was required to compare costs and benefits, but the cost of human lives was not included so the level of protection from hurricanes was smaller than for river floods. Even this minimal project was underfunded. The project to upgrade the levees after Betsy was delayed by funding cuts. By 2000 the project was still 20 years behind schedule. Local entities were responsible for 30 percent of the construction costs of hurricane protection and all of the operating costs including maintenance. Many resisted the high cost of protection for even just the Category 3 storm event and sought to reduce standards. Levee boards stopped plans to build floodgates on canals from the lake into the

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city, as they were considered too expensive to maintain. The Corps was directed to build the cheaper but less effective floodwalls instead of gates to keep the water out. During the storm surge of Katrina these floodwalls collapsed. The Louisiana congressional delegation worked the appropriations process so that money did come to the state, but much of the Corps’s funding was directed at business-friendly projects such as damming, dredging, and deepening waterways to make commercial navigation quicker and cheaper. Aiding business rather than flood control or hurricane protection was the Corps’s chief mission.15 The Mr. Go project was the most obvious. The Corps ignored environmental considerations in its 2004 assessment of the project.

The Infrastructure Deficit of Small Government The levees were supposed to protect New Orleans from storm surges and the permanent threat of flooding. The Katrina disaster was not the hurricane impacting a city but the effect of the storm surge on defective levees that were poorly designed and inadequately maintained. The engineering solution totally failed to protect the city. On Monday, August 29, 2005, the storm surge moved toward the city from two directions. From the east, the surge was magnified by the hurricane superhighway of Mr. Go and funneled into the Industrial Canal where it breached levees protecting the Lower Ninth ward, one of the poorest areas of the city, and one gaping hole measured 900 feet. Along the Industrial Canal the storm surge overtopped the floodwalls that eventually collapsed. From the north, the storm surge swept in from Lake Pontchartrain along the 17th Street and London Avenue Canals. Five immense holes were made in these three canals and over 50 individual instances of levee failure and collapse were observed. The result: 32 billion gallons of water poured into the city. Soon 80 percent of the city was underwater, with some places 20 feet underwater. The main and recurring conclusion of the many investigations of the levee failure is that inadequate design, poor construction techniques, and sloppy maintenance by the Corps and local organizations were at fault. There were multiple causes. Failure at the 17th Street and London Avenue Canals occurred even though the water did not seep over the tops. Piles that should have been 17 feet deep were only 10 feet deep. Not deep enough to anchor the wall against the heavy pressure of the

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storm water. Mistakes were also made in assessing soil strength and in not accounting for water-filled gaps. Along the 17 Street Canal the pressure of the storm water bowed the wall outwards, creating a gap between the wall base and the earth. The gap quickly filled with water, pressing the walls even further. There were two forms of failure: (a) overtopping and (b) breaching. Overtopping occurred when water flowed over the top of the levee wall, eroding the earthen base on the other side. The levee walls then tilted with the pressure and water forced through the base of the wall, eventually toppling the wall. Overtopping occurred because the levees had sunk since their construction, in some cases, up to three feet below where they should have been. Most storm surges were only one to three feet above the height of the shrunken levees. Breaching occurred when holes developed in the levee walls. Most of the floodwalls were I-wall construction of sheet piling driven vertically into the soil. These are much weaker than the recommended T-wall that has a larger inverted T-shaped base over sheet piling and tapered batter piles driven in at an angle to the vertical. Because of the soft weak soils in New Orleans, the floodwalls should have been T-walls but most of them, because of cost consideration, were the less protective I-walls. Prior to Katrina, residents reported leaks in the walls, but local organizations responsible for maintenance neglected them and failed to do even these minor repairs. All the design errors and construction mistakes increased the likelihood that in the event of even a Category 3 hurricane storm surge the levees would fail. The overtopping of storm walls and breaching of the levees were not a natural disaster but a failure of engineering. The safety margin was too thin. Previous Corps studies, dating as far back as the 1980s, foresaw the possible failures but nothing was done. On the eve of Katrina, the city was inadequately protected for a Category 3, let alone one of higher magnitude. It was a disaster waiting to happen. It was levee failure that led to the catastrophic flooding after Hurricane Katrina that killed over 1000 people and devastated the city. The flood protection system failed. And failed miserably. There were over 50 breaches in the levees and floodwalls that were supposed to protect the city. Subsequently, numerous reports highlighted the many engineering failures that included poor construction, overestimation of soil strength, inadequate soil analysis, and negligent maintenance.16 Even the Corps’s own report on the failure showed that many of the city’s levees and floodwalls were way too low and the pilings used in construction were not

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built deep enough. The levees provided at best only incomplete protection, with so many major flaws in design and construction that they were inadequate to deal with even a medium-sized hurricane.17 The protection was neither high enough nor strong enough to save the city from a predictable storm surge. The city’s pumping stations were the second line of defense for flooding. The city had 23 pumping stations with a total of 140 pumps. One station can pump 70,000 gallons of water per second. Even if the pumps had been working, it still would have taken two days to clear the city of floodwater. Flooding was so rapid and levee breaches so severe that pumps were inoperative. Even if they were working, until the levees were repaired, they would be simply recirculating not pumping water out of the city. The flood damaged most pumping stations. Two weeks after Katrina only half the pumps in one station were operative. All the pumps finally were brought online after three weeks, with 20 percent of the city still under water. This disaster was quite literally a structural flaw. What lay behind it? It was more than just an isolated event. Upstream from New Orleans, there was another disaster when in 2007 a bridge that carried an interstate highway across the Mississippi River collapsed in Minneapolis, killing 13 people. The bridge was designed in the 1960s, but more traffic meant more weight as concrete railings were installed to separate traffic moving in opposite directions. The bridge was classified structurally deficient as early as 1990 and again as recently as 2005. The bridge collapse was not an isolated problem. In 2008 72,868 bridges were rated in the National Bridge Inventory, compiled by the Federal Highway Administration, as structurally deficient, with an estimated repair bill of $48 billion, and a further 89,024 as functionally obsolete, with an estimated replacement cost of $91 billion. The wider context to the levee failure is the infrastructure deficit in the United States, the fact that not enough money is invested in long-term infrastructure maintenance, improvement, and replacement. The gradual shift of US political discourse toward a belief in small government, with a commitment to no new taxes, undermines the ability of the public sector to finance expensive, but much-needed infrastructure such as airports, bridges, levees, storm walls, and roads. Because they are large investments tied up for years with moderate returns, these projects are traditionally undertaken by the public sector. Yet massive defense spending and transfer payments (such as Social Security, Medicare, and Medicaid) dominate government spending at the federal level. With an expensive Empire and

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costly social programs for baby boomers, there is not much money left over. The same is the case at the state and local levels, where there are also self-imposed restrictions on generating more tax revenue while tax expenditures are directed more toward shorter-term economic payoffs than the longer-term infrastructure investments. The failing levees and collapsing bridges are just the most visible and dramatic signs of an infrastructure deficit in the United States. Between 1950 and 1970 the United States spent 3 percent of its GDP on infrastructure building and maintenance. Since 1980 that figure has dropped to 2 percent. The reduction in spending is taking place at a time when the postwar infrastructure is beginning to age and fail. The American Society of Civil Engineers produced a report card of the nation’s infrastructure at the same time as Katrina made landfall. It paints a woeful picture, with 4 C’s and 11 D’s. Bridges were rated as C while levees were D–. Whether it be aviation, dams, roads, schools, or wastewater, it is the same picture: lack of investment and mounting problems. The society estimated that adequate infrastructure required spending $2.2 trillion over five years.18 The failure of the New Orleans levees was neither a random nor an isolated breakdown. While China invests 9 percent of its GDP on infrastructure and Europe invests 5 percent, the United States spends little more than 2 percent. New infrastructure is delayed and maintenance on existing infrastructure is deferred. The resultant effects are obvious in the state of roads, the condition of schools, or the quality of the water: the public sphere is starved of funds. Before Katrina, Congress and local entities restricted how much money the Corps could spend. Earthen levees topped by concrete walls were used as cost-saving measures. The I-wall was preferred to the more protective T-wall. New technologies and up-to-date designs were not employed. For example, it is more efficient and safer to use fabric grids sandwiched between layers of soil, yet the cheaper and less adequate method of concrete walls was employed. An inadequate system was poorly maintained for years. Miles of levees failed: this was not an isolated breach but a failure of the entire levee system that was built on shoddy design, employing poor construction methods, and its lack of maintenance and regular inspection. For the four-year period before Katrina, funding for hurricane protection work by the New Orleans District Army Corps was slashed. A $27.1 million request was cut to $6 million by the White House and in spring

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2004 the funding to raise levee walls that were sinking due to subsidence was cut by 75 percent. Congress did not pay for the upgrade of the levees that would have cost $2 to $3 billion. It turned out to be a false economy: the total costs of clearing up after Katrina are guesstimated at $100 billion. The political realities behind the infrastructure deficit are not hard to see. The “no new taxes” mantra is now a rarely challenged statement of faith that limits extending the base of tax revenue. And the direction of spending is biased toward the politically connected projects and items placed highest on the immediate political agenda. Long-term, large-scale infrastructure lacks the political sexiness to generate much support. Who wants to expend their political capital in supporting long-term projects for the distant future? Adequate levee protection in New Orleans was not simply the result of engineering failures but also of decades of neglect. Long-term major infrastructural investment is delayed or postponed as budgets are crafted toward smaller projects with greater political payoff. The budget of the agency responsible for the levees, of the Army Corps of Engineers, is almost entirely set by earmarks requested by members of Congress. When the Corps finally took up hurricane protection after Hurricane Betsy, they were biased away from hurricane protection that saved lives in favor of encouraging residential and industrial development in the wetlands. Plans for floodgates for the 17th Street and London Avenue Canals were dropped to save money. Long-term infrastructural projects are always difficult to sell to the public, especially an American public sold on the idea that government is the problem and not the solution. The steady criticism of not only the direction of government, but also the size and in some extreme cases even the legitimacy of government, makes it increasingly difficult to propose long-term infrastructure spending. There are enough cases of corruption and incompetence to merit skepticism of the efficacy of government programs and a downright reluctance to undertake any ambitious program. And large-scale infrastructure has to be ambitious to be effective. Major infrastructure investment need not be a monopoly of the public sector. There is no reason why the private sector cannot be more involved in infrastructure traditionally under the control of the public sector. If there are enough opportunities to make money, private capital will be invested. And legislative oversight can ensure safety and compliance. Problems could be ironed out to ensure value for money as well as

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safety. However, the system we have at the moment is the worst of all possible worlds, with a cash-starved public sector whose agenda is shaped by access to power and political connections rather than a careful assessment of costs and benefits. There is neither a truly private system where the threat of legal action would make risk assessment a more integral part of corporate decision-making nor a truly public sector that can undertake programs free from political interference and business influence. Too much of our infrastructure is provided by a public sector hampered by lack of funds and directed by a cronyism that fails to take into account longterm objective solutions. Infrastructure projects such as levee construction and maintenance are neither a truly nonpartisan public sector spend nor a completely private sector undertaking; it is a system that combines all the worst excesses of political patronage and favoritism in an inefficient public sector. Whatever the method used, public or private or some combination of the two, there is a desperate need for a complete overhaul of the infrastructure of the United States. The provision of much-needed infrastructure also has the benefit of stimulating a stagnant economy. Traditionally, economists advise against large-scale infrastructure investments because they take too long to inject increased spending into the system. But the current recession is likely to be so long and deep that long-term investments will play an important role in getting us to the other side of this mess. There are two potential hazards associated with large-scale infrastructural investments. The first is that the money will be allocated in the usual pork-barrel fashion with powerful US House and Senate committee personnel steering funds to their districts and states irrespective of the benefits. In order to short-circuit the possibilities of future bridges to nowhere, we need a bipartisan commission that evaluates objectively the cost and benefit of major infrastructural investment. We already have a model that works. The recommendations of the Defense Base Closure and Realignment Commission (BRAC) cannot be cherry-picked by members of Congress. The recommendations are voted up or down in a block so that individual members cannot influence the fate of individual bases. A similar procedure for a National Infrastructure Commission is essential to reducing wasteful spending. A second potential problem is that, just like with wars, we tend to fight the next one with the strategies of the last one. We must avoid building

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new infrastructure geared toward the needs of the last economic growth wave. A National Commission on Infrastructure would need a mandate to build for the future, not just for the short term and the present. The interstate system was perfect for the car age coming into its own in the 1950s. What we need now is an infrastructure that promotes smart growth and long-term sustainable economic growth. Building more bridges or motorways just because that is what we always have done is to build for the 1950s, not the 2050s. New and improved infrastructure should be directed toward more creative use of mass-transit systems, refurbishing aged inner cities and inner suburbs and improving citizens’ lives, and laying the basis for a greener economy. The time is now. Governments can borrow money at incredibly cheap rates to finance the projects. There is a huge infrastructural deficit that needs to be addressed and, at the time of writing, a desperate need for an effective stimulus to an ailing economy exists. From the nation’s last great crisis, we created the New Deal. We need a new “New Deal,” one that appropriately funds and fairly distributes infrastructure projects that lay the foundations for a smarter, greener, more competitive economy.

A Failure of Initiative The Katrina disaster was also a failure of the government to protect the most vulnerable. After the city was flooded, the response of the government was woefully late and shockingly inadequate. Despite warning of the direction, intensity, and timing of the storm the government response at all levels was so slow and so bad as to prove ultimately fatal for too many people. At the federal level, the secretary of the Department of Homeland Security (DHS) did not use all the available options necessary in dealing with a major event such as a timely designation of an Incident of National Significance, convening an Incident Management Group, designating a principal federal official, or invoking a Catastrophic Incident Annex. These measures would have sped the federal response to the stranded citizens of New Orleans. The local and state governments had inadequate plans and slow response times, while the principal federal agency was not prepared to deal with a catastrophic event. Local officials did not announce a mandatory evacuation of New Orleans until only 19 hours before the storm arrived in the city. As the levees collapsed

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and the floodwater poured into the city, over 1000 people were killed. Between 50,000 and 100,000 people were stranded in the city. Almost 45,000 people were holed up in the Convention Center or Superdome for almost a week. Images of poor and vulnerable citizens abandoned by the government shocked the nation and the international community. The obvious question is why a superpower like the United States, so able to affect a global reach and project a presence around the world, was unable to rescue its own citizens from the effects of a hurricane whose track was accurately predicted many days in advance. Let us for the moment avoid the search for individual blame. At the local level the mayor of New Orleans, Roy Nagin, was more concerned with his own image than with planning an effective evacuation, and the governor of Louisiana was unable to link effectively with the White House. At the federal level, a distracted President Bush was on a weeklong holiday in Texas; the secretary of DHS, Michael Chertoff, clearly lacked a sense of urgency or even much sense of responsibility, and then there was the Federal Emergency Management Agency (FEMA) director, Michael Brown, who came to personify the problem of politically connected patronage, especially in favor of the administratively incompetent. There is clearly enough blame to go around, but as with the other crises let us consider the deeper structural factors. Federal response to hurricanes is not always an exercise in incompetence. The response to Hurricane Katrina compares unfavorably to FEMA’s response to Hurricane Charley that crossed Florida in August 2004. Four days after the storm hit, a hundred trucks of water and 280 trucks of ice were available. Almost one million ready-to-eat meals were assembled; over 4000 National Guardsmen were mobilized and 300 medical personnel were on standby. The major difference is that Florida had long experience of hurricane disasters and had revamped the state’s response since Hurricane Andrew in 1992 and had worked to improve federal–state disaster relief relations. The more cynical might also note that it was three months before an election, Florida is a key state, and the president’s brother governed the state. Federal response can vary. In contrast to Charley, the federal response to Katrina was slow and inadequate. At the heart of the failure to respond to the plight of a major American city are three structural fractures: the federal nature of the United States, the prioritization of Empire over the national community, and the endemic issues of race and class. Let me consider each in turn.

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The Push and Pull of the Federal System The United States is a federation of states, not a loose federation but one tightly bound to a central federal structure. Since the founding of the republic, there is an ongoing debate about the exact distribution of powers between the two levels, a never-ending argument about the true center of political gravity. Following on from Thomas Jefferson, one line of thought promotes state independence from the central government. In contrast, a line of argument that starts with Alexander Hamilton proposes a stronger central government. While the tendency is toward a stronger central government, a function of the rise to Empire, there has always been a powerful counter-direction. State rights are always invoked in issues of domestic policymaking and especially when an expansive federal system impinges on local power centers. The resistance to civil rights legislation, for example, was wrapped around issues of states’ rights, an important cover that gave a more palatable defense of local customs, even ones that discriminated against fellow Americans simply because of the color of their skins. In both the design and implementation of domestic policy, there is often an awkward push and pull among the levels of government locked in a complex relationship. The federal center wants to retain control, but often pushes out to states the funding requirements, while the states often want the federal government to pick up costs without interference or abrogation of states’ rights. The response to major disasters is one of those policies that can fit uncomfortably between the cracks. Small disasters are more easily containable within the existing power relations. Major disasters, such as the drowning of an American city, expose cruelly the fault lines in these relations. And if the local government and states are poor and lack sufficient resources, then a delayed federal response can prove fatal. Federal response to disaster relief was always hedged in by sensitivity to local autonomy and reluctance to take on a pivotal role. In 1952 President Truman emphasized that the federal government was to supplement, not supplant local authorities and private agencies. And this has been the stance of most subsequent administrations. The 1988 Stafford Act, a piece of legislation that amended the Disaster Relief Act of 1974, guided disaster response at the time of Katrina. The legislation gives primacy to local authorities. The primary government unit responsible is the state. The governor of a state needs to

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first declare a disaster. Federal assistance is generated when the president subsequently declares a major disaster emergency; then the Federal Emergency Management Agency (FEMA) coordinates the contribution of almost 30 different federal agencies and nongovernmental organizations in a National Response Plan (NRP). It is a system in which the states’ response pulls in federal assistance. But this mechanism requires that the states are resourced, able to make an assessment, and that the federal support comes soon after the declaration. For catastrophic events, assistance needs to be positioned well before or very soon after the event. Federal assistance awaits the local response and even then, the federal response is splintered into different agencies with different chains of command. There is an awkward push and pull between the local and the federal levels. In the case of responses to Katrina, the city and state failed to pull in federal support, and federal support was initially inadequate. The NRP was ineffective. A push system did develop, but it took too long. The federal response was tardy. No later than two days before the storm struck the city, the secretary of DHS should have designated an Incident of National Significance, an Interagency Incident Management Groups, and a Principal Federal Official. A coordinated response was made difficult by the shared responsibilities between the different levels of government, including the city of New Orleans, the state of Louisiana, and the various federal agencies. The most effective federal agency you would think is the military; they have the equipment and the manpower, but they lack experience and guidance about their role in disaster relief. Sending in the troops is the common response to major disasters around the world, but in the United States competing federal and local responsibility and roles and even a lack of coordination between National Guard and the active-duty personnel hampers this obvious response. The military is not the lead agency. The federal government takes its lead from the state and local authorities. Federal military is prohibited by law from performing law enforcement functions with all sorts of restraints and constraints imposed by a constitution that assumes the quartering of British troops in the colonies is still a pressing concern for the United States in the twenty-first century. There are also two military chains of command composed of federal troops and the National Guard that are under state command. The communication between FEMA and the Department of Defense was too poor to get the federal military involved, and when they did, they lacked coordination with the National Guard and local police officials.

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Once the city flooded and people were stranded, there was a long delay in evacuating them. Neither the city nor the state, or the various federal agencies, had effectively planned for an evacuation. The response was haphazard, marked by delays, poor communication, and miscommunication between the various actors. Too many actors and a splintered government response are principal structural reasons behind the failure of the government to respond quickly and effectively to the flooding of the city. The Stafford Act was drawn up to deal with minor disasters while respecting state sensitivities. It was designed for small-scale problems and assumes state supremacy in disaster response. In an era when major disasters can occur, the existing legislation effectively limits massive federal aid. Looking back at the experience of Hurricane Katrina and the governmental failure, a number of studies come to the same conclusion: fractured responsibility and confusing lines of authority were responsible for the failed response. The nonpartisan Government Accountability Office noted that leadership roles, responsibilities, and lines of authority for the response were poorly defined and ineffectively communicated.19 The report goes on to raise the idea of a single individual directly responsible and accountable to the president. The Congressional Committee charged to investigate the disaster response concluded: The single biggest failure of the federal response was that it failed to recognize the likely consequences of the approaching storm and mobilize federal assets for post-storm evacuation of the flooded city.20

Numerous studies have noted the ambiguous distribution of authority and responsibility, the problem of coordinating so many different organizations and agencies including local, state, and federal as well public and private, government and nongovernment agencies, federal and National Guard military units.21 Coordination plans are mostly untested and there is no assumed leadership to manage coordination. Some examples highlight a lack of command. There is confusion between a Federal Coordinating Officer and a Principal Federal Official. Neither is allowed to assume overall command, even in the absence of state or local command. In terms of federal authorities alone, the NRP designates ten different agencies, including Department of Transport, Department of Defense, EPA, Department of Energy, and the

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Department of Health and Human Services. Individual units within these agencies include the Forest Service and the Coast Guard. In terms of military involvement, the National Guard is first called in. In the event of a major disaster, the US military may be involved, but there is no shared command or even shared communication system between National Guard and federal troops. In the NRP the American Red Cross (ARC) is designated as first responder in the immediate wake of disaster. Yet the ARC’s response to recent disasters is patchy at best. It was only in the second week after Katrina struck that the ARC was providing measurable service to affected communities. When a nongovernmental agency with a troubled past and fractious internal organizational structure is the designated first responder, the inadequate response to Hurricane Katrina is not such a surprise. The fracturing of responsibility was exposed during the response to the flooding of New Orleans. However, such complete incompetence as happened after the flooding of New Orleans often requires a number of other actors working simultaneously. The response to Hurricane Katrina was itself a perfect storm of cascading factors. Most of the senior members of the federal government were on holiday or away from Washington, DC. There were awkward relations between officials on the ground in Louisiana and the White House. The Democratic governor of Louisiana and the Republican president had a strained relationship. The mandatory evacuation of the city was called in late. FEMA’s ability to respond to natural disasters had been gutted after it was subsumed under the Department of Homeland Security in 2003. As experienced personnel left the agency, the human capital of knowledge and experience was lost. The director of FEMA, Michael Brown, was a political appointment with little disaster relief experience. But here we need an insert. Political patronage is endemic for appointments in government in the United States. Most advanced countries have had some form of major political change, be it a bourgeois revolution or a social democratic transformation, which has updated the public service to make it more professional, more immune from political considerations. The British Civil Service is a case in point. The United States, with one of the oldest straightest links in its constitutional structure since its origins, still has elements of a premodern public service. Under the constitution, the president can appoint individuals to government positions. Patronage used to be more widespread throughout the bureaucracy. Nowadays it is limited although not exclusively to more senior positions. There are

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almost 3000 political appointments in the federal government. Michael Brown was one of those. George Bush appointed him as director of FEMA in January 2003. Before joining FEMA as general counsel in 2001, he was a commissioner of the International Arabian Horse Association. Multiple lawsuits marked a difficult tenure. Joe Allbaugh, then director of FEMA whose main qualification for the position was that he ran Bush’s 2000 presidential election campaign, initially hired Brown. Much has been made of Brown’s lack of disaster experience and his obvious political connections rather than the appropriate administrative experience. After the president’s remark, “Brownie, you’re doing a heck of a job” on September 2 was followed by images of people stranded in the flooded city, Brown became the public face of government incompetence. Brown soon became the scapegoat of the government failure. He was roundly condemned and mocked. He was relieved of his duties on September 9, 2005, and resigned three days later. Now, years after his performance— given the gutting of FEMA and the inadequate response by his boss Michael Chertoff—Brown, while not exactly a victim, may be considered something less than a villain. He had fought against the funding reductions of FEMA and tried his best, albeit his best was not very good either in terms of directing FEMA or initially persuading the White House of the incident’s serious nature. He was a political hack, easily sacrificed and quickly put forward as the reason for the response’s failure. His sacking was an act of political theater, an easy solution to a much deeper problem. By personalizing the failure rather than looking at the deeper structures of failure, we easily allocate blame but fail to invoke deeper problems and longer lasting solutions. His role does raise the issue of the problems of political patronage, but in this case, his tenure was a symptom of government incompetence and not the cause of the problem. A previous political appointee, James Lee Witt, appointed by President Clinton as director of FEMA, is generally considered a resounding success in making the agency more efficient and responsive. It is not so much political appointments in general that are problematic; it is the specific appointments. While Brown was a political operative, Witt had extensive experience in state emergency management. Patronage is wrong only when the wrong people are patronized. In the days after the flooding, government incompetence, slowness, and general failure led to thousands of people stranded in a major American city. But these complex interactions spun out against the hard realities

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of divided government, poor coordination, and the lack of a coherent federal response, symptoms of the underlying structural problems of a fractured government response to major disasters. And for this we have to blame not Michael Brown, but the architects of the constitution. The Founding Fathers created a system of competing federal and state centers of power, multiple sources of power and authority, limitations on the domestic use of troops, and barriers to a strong central government. They wanted to limit the power of government by spreading it wide and deep. Their greatest fear was concentrated political power, and their legacy was a government system so organized as to limit its domestic imprint. There is an asymmetry in US power. When operating overseas and outside its border the US Empire concentrates power. From the commander-in-chief through senior military commanders to troops on the ground, there is a coherent chain of command. Responsibilities and authority are assigned and understood. Outside its border, US power is singular, concentrated, and effective. At home, the basic structure of the system leads to fragmented government and multiple overlapping and sometimes confusing lines of authority and responsibility. That is fine if you want to limit federal power. It tends not to work too well if you need a strong, decisive government response. And that is what you need when a disaster overwhelms an entire region and floods most of a city. To be sure, there is a learning curve. Federal disaster relief is now crafted to be a push more than a pull and lessons from Katrina mean that the specific mistakes may not be made again. But the underlying fragmentation of power and authority means that lack of coordination is not an incidental fact, but one that can easily happen again and again. The administrative flowcharts that depict the National Emergency Plans look like a crazed doodle or a plate of straggly spaghetti. The real question is not the failure of the Katrina response but why there are not more of them. Catastrophic disasters strike at the heart of the devolved system and fractured responsibility of US domestic power. As a political footnote, Katrina, like the fiasco in Iraq, damaged Bush’s reputation. Alongside the image of him speaking into a bullhorn at the devastation of the World Trade Center, a picture that buttressed his domestic support, there was now the less flattering image of him looking down at New Orleans in the wake of Katina from Air Force One thousands of feet above the disaster. These pictures became a metaphor for a president disconnected from the realities on the ground, aloof, slightly befuddled, and quite literally out of touch with events on the ground.

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In the wake of the fiasco in Iraq the mass media, in part ashamed and embarrassed about its conduct in the run up to the war, took a more critical look at the administration. In New Orleans the journalists were not embedded, unlike in Iraq where embedded journalists initially drank the Kool-Aid of an easy, uncritical patriotism. In New Orleans the news anchors, their images carefully framed against the human misery of stranded thousands, contrasted the reality on the ground with the official announcements. A newly critical and disembedded mass media shone a very critical light on the government’s handling of the disaster. Almost two-thirds of Americans polled disapproved of President Bush’s handling of the disaster. Two weeks after the disaster, Bush’s approval rating fell to 42 percent and then began a long slide to only 23 percent by the end of his presidency in 2008. Katrina blew away much of his support among those in the political center.22 From Nation to Empire One of the unintended consequences of the rise to Empire is the shift in government priorities from domestic to overseas. In the United States, there is a less vigorous debate over the rise of Empire than the debate about the size and role of government in the domestic arena, and not only disagreements about the precise policies but also about the fundamental nature of legitimate government. So, while the role and size of government in domestic issues is deeply questioned, its imperial posture is unchallenged. Foreign threats trump internal concerns. This was vividly demonstrated during the lead up to Katrina. It was apparent when the 2004 Army Corps of Engineers’ $22.5 million request to update hurricane protection in New Orleans was cut to $3.9 million by the White House and only raised to $5.5 million by the Congress; in 2005 only $3 million was allocated by the White House. There was little real debate about internal threats posed by environmental hazards. The Times Picayune newspaper had been running news reports and articles about possible levee failure since 1998; a major five-part report in 2002 noted, “we grow more vulnerable every day.”23 It was apparent in the aftermath of 9/11 when FEMA was incorporated into the new DHS, and its mission was focused on terrorism rather than environmental disasters. Now it could be argued that this was a legitimate response in the wake of the deadly attack on the United States. But what is interesting is how easily and quickly a previously highly successful agency in a country with no

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shortage of “natural” disasters could be transformed into yet another arm of a security state. FEMA personnel with environmental disaster response experience left in droves so that the agency became small, marginalized, and dispirited with no more than 2600 full-time employees spread thinly across ten regions. Brown sent a memo to the secretary of the DHS in 2003 that the incorporation could lead to “an ineffective and uncoordinated response.”24 It was also apparent in the lack of training of the US military, both federal and National Guard, to cope with domestic disaster relief. We spend billions on the military, yet they seem slow to mobilize and unable to provide a coordinated response to urgent domestic needs. That is because the military is primarily trained and used to support Empire rather than help with domestic disasters. We spend billions to project US power abroad but are unable to mobilize these resources to help at home. Empire trumps the needs of the national community. It was also apparent in some of the more immediate responses to Katrina. Christopher Cooper and Robert Block relate stories of the Transportation Security Administration delaying evacuees trapped in the Superdome and Convention Center so as to screen their luggage and holding up evacuations to check for terrorist cells among those fleeing the city.25 The myopic concerns of petty bureaucrats are a fact of life in the United States as elsewhere, but they are given strength and purchase when the emphasis is on security rather than community and the management of fear and external security rather than the creation of safety and domestic harmony. With the rise of Empire, the federal government spends more time, money, effort, and energy on external threats, real and imagined, than the everyday and local concerns of ordinary Americans. Race, Class, and Citizenship A hurricane struck New Orleans long before Katrina made landfall in 2005. It was a long, slow, human-made disaster of job loss, lackluster governance, increasing poverty, and hyper-segregation. The city was in deep trouble long before it flooded. The storm simply exposed the deep fissures of race and class in the city and the level of government dysfunction. The woeful government response to the flooding revealed a deep structural flaw: diminishing the size of government and the range of progressive government policies has a disproportionately negative impact on the poor and the marginalized. Disasters highlight the weakness of

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a system that does not take good care of the weak and the poor. The response to Katrina revealed the basic structural flaw of the only partial citizenship status of the poor and their limited claim on governments in times of great need. New Orleans, like all cities, is both uniquely itself and yet also part of a broader urban system. The city’s complex history, with elements and traces of Native American, French, Spanish, white American, and black African, made it as much a Caribbean as a continental American city. New Orleans was in the US territory but never quite a US city, a fact noted by successive visitors. In 1835 Joseph Ingraham described it as a “foreign city in the United States.” Harriet Martina wrote about the city in her 1838 Retrospect of Western Travel, “All was very new, very foreign in its aspect.” William Kingsford in 1858 noted, “The first feeling on entering New Orleans is that you are in a city differing from all others in the Union.”26 New Orleans was never a wholly modern city. The culture of the factory, the oppression of the clock, the emphasis on rationality, and the effective management of time and resources never took hold. The city did not escape completely from the spatial restructuring of modernist urban planning that blighted so many US cities in the 1960s and 1970s. Urban renewal and highway construction cut swathes through the city, causing havoc and devastation. But the more the city lived off tourism, the more it cultivated its historical connections with the past rather than promoting a forward push into the future. It retained the premodern, almost plantation economy feel with a more recent postmodern, emphasis on tourism, imagined past, and cultivated histories. When one of the biggest tourist events is a celebration of the ending of Lent and a popular tourist route is a circuit of cemeteries, you know it is not a modern city like Cleveland, Los Angeles, or New York. In New Orleans, you are not in Kansas anymore. As tourism became a major industry, the past was reimagined and commodified as a US city, but a US city with a more elastic moral code. Even before Katrina, the city had problems. As its economic competitiveness slithered downward, there was marked population and job loss. The city lost its ability to attract new capital or new people. Established lines of race and class continued to exist, locking the city in an ossified social stasis. The sense of stagnation, the smell of sweet corruption, pervades the work of Tennessee Williams, who in 1938 moved into the French Quarter, a bastion of bohemia until it succumbed to gentrification

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and commodification. There was some economic development: tourism, shipping, and, more recently, energy-related jobs, but not enough to create a large and affluent middle class. There was also some political change as, from 1978, light-skinned blacks replaced white mayors, but this was merely a change in skin color of the top politician: the city’s underlying problems of poverty remained untouched. Economic decline hollowed out the city. From 1960 to 2000 the city lost population, from over 627,000 to 484,000. White flight changed the racial geography of the city. From the 1960s, when the public schools were desegregated and whites moved out by the thousands, the city became an increasingly black city. Between 1960 and 2000 the white population dropped from 400,000 to around 140,000 while the black population increased from approximately just over 235,000 to 335,000. As one writer notes, “New Orleans had been converted from a white city with black enclaves to a black city with white enclaves—mostly upper-income.”27 In 2000, the last census date before Katrina, the city had one of the poorest, lowest-paid populations in the country. It was a place of concentrated poverty. Almost 28 percent were below the poverty line, more than double the national average. The poverty rate for blacks in the city was three times that of whites. It was also a place of racial segregation, with blacks making up 84 percent of the city’s poor population. And of these, almost half lived in areas of extreme poverty. The neighborhoods were highly segregated. Rich neighborhoods such as Lakeview, where more than nine out of every ten households had access to private transportation and average household income was $63,000, were 85 percent white, while poor neighborhoods such as the Lower Ninth Ward were almost 100 percent black.28 In the Lower Ninth Ward average household income was $27,500, and more than a third of households had no private vehicle. Community experiences and hence community responses were racially coded. Most residents of rich white neighborhoods could evacuate relatively easily as they had access to private transport. When Katrina’s floodwaters arrived many residents in the very poor black neighborhoods with no access to private transport and with no government provision of public transport were effectively trapped in the city. New Orleans, like many US cities, embodied sharp cleavages in race and class, divisions reinforced by the sluggish economy, and the inability of the government at all levels to ameliorate the differing life experiences. The failure was tragically enacted in the response to Katrina. Some analysts describe the city government as a “nonregime.”29 The term

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“regime” is used to refer to alliances between different, often competing groups to manage and run a city. In Atlanta, for example, the downtown business interests ally with the black political class in order to get things done. In New Orleans, in contrast, public and private actors lack a coherent and shared vision of the city. The city lacks a vibrant corporate community, or a shared political vision. The result was a dysfunctional city run by a series of loose, issue-based coalitions that failed to provide even the most basic of services. The school system was failing most of the city’s children. The police force was so poorly paid that most officers did outside work and were easy prey to corruption. Even before Katrina the New Orleans police force was considered one of the least efficient and most corrupt police forces in the country. The city was severely challenged and woefully unprepared to help its citizens, especially the most vulnerable that need the most help and assistance. Lacking resources, schemes of cooperation, or even a functioning police force, the city was ill-prepared for Katrina. Let us consider just one example of the city’s problems—financing the city. Like many US cities, New Orleans was impoverished by suburban flight that took away the tax base and left behind residents who needed and demanded higher levels of public services. It was a US city, but a US city with its own particularities. There were, for example, also two unique elements to the public financing of New Orleans. The first was the very heavy reliance on sales tax to fund general expenditures. This allowed the city to capture revenue from visitors and tourists, but it was a regressive tax since poorer residents spend a higher proportion of their incomes on the basic goods subject to the sales tax. The second main source of revenue was a property tax system that was filled with exemptions and subject to political influence and downright cronyism. Assessors were elected rather than professionally appointed. The result was that assessments on properties were based as much on property owners’ donations to the political campaigns of the assessors rather than the underlying value of the property. Even before the storm, the city announced that it was unable to evacuate almost 140,000 people who did not have access to private transportation. In one of the poorest US cities, with many people without access to private transportation, there was no effective plan to offer public transportation. Response at the state level was also hampered by the poverty of the state. Louisiana is one of the poorest states in the union with average

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income close to 20 percent below the national average. While around 14 percent of people are below the poverty line in the United States as a whole, the figure for Louisiana is 17 percent. Following are some comparative statistics on welfare that indicate the gulf between states in dealing with the more vulnerable. Unemployment benefits, for example, are paid by the state. There is tremendous variation. Some are generous: Massachusetts, for example, pays between $628 and $942 for a total of 72 weeks. Some pay less but for a longer time: North Carolina, for example, pays $494 for a maximum of 79 weeks. Louisiana, in contrast, with one of the highest levels of long-term unemployment, has one of the lowest benefit levels at $284 for the one of the shortest periods of only 46 weeks. As one report noted, Louisiana spends relatively few dollars on its basic income safety net.30 There is no one-to-one relationship between a state’s wealth, social spending, and its disaster response. However, the paltry resources devoted to social services are a predictor of the effectiveness of a state in dealing with disaster. At the federal level, there is little ability or desire to augment the limited city and state provision. The steady drift toward a minimal state means a lower safety net even for disaster relief. The priorities of Empire and the infatuation with national security meant that immediately prior to Katrina, domestic non-terrorist emergency response was underfunded and largely ignored. FEMA became a backwater, a place to appoint political hacks, rather than a well-funded agency headed by seasoned professionals.31 Two months before Katrina, as the local newspaper reported in July 2005, the blunt message to the city’s poor was “In the event of major hurricane, you’re on your own.”32 Katrina was a disaster, but not a natural disaster devoid of social construction. The real disaster was to be poor and black in a city that lacked a plan or even a willingness to come up with a plan for evacuation; to be poor and black in a state that was one of the most miserly in how it treated its weakest citizens; to be poor and black in a country that was ignoring the poor and had long marginalized blacks from the shelter of full citizenship. Hurricane Katrina did not come unannounced. Its trajectory was accurately forecast days before it landed. The decision made by many people in the city not to evacuate was shaped by many factors. There was the experience of having survived previous hurricanes and instances of the destructive force of hurricanes petering out before actually affecting the city. There were confusing and conflicting messages from all levels of

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government about when to evacuate. And then there were the social factors. For a third of the city’s population—many of them ill and disabled and without access to private vehicles—the decision to stay was less a decision and more a brutal outcome of limited resources. The poor and the disabled had limited mobility. And then there were the recurring issues of race and class. Poor minorities are especially fearful of leaving their homes and passing through all-white areas policed by officers with a history of outright racism. The decision to stay reflected a complex set of factors including poverty, disability, and basic lack of trust in the authorities. The fears were not unfounded. At Danzinger Bridge on Sunday, September 4, two men were killed and four wounded by New Orleans police officers. None of the victims was armed or were committing a crime. The police tried to cover up the murders. On August 5, 2011, a federal court found five police officers guilty of the shooting and attempted cover-up. Katrina made landfall at around 6 a.m., on Monday, August 29. Over 80 percent of the city was flooded by the end of Tuesday, August 30. Survivors made their way to the Superdome where almost 20,000 gathered. There was no plan for their evacuation. Over 45,000 people were still stranded in the Superdome and the Convention Center three days after Katrina struck the city. These two civic buildings lacked the necessary water, supplies, and medical facilities but were turned into makeshift shelters because there was nothing else. For almost an entire week the government abandoned distraught citizens in inadequate shelter, suboptimal care, and wavering attention. It was a national disgrace given extra bite, as most of the trapped were overwhelmingly poor and majority black. The disaster reinforced the image of the United States as a society riven by deep fissures of class and race, where one’s income and skin color determine the effectiveness of the government’s response to disaster. Inequality and poverty by themselves are not necessarily a structural stress. What is revealed in the case of New Orleans is the structural problem of how US governments at all levels deal with the poor and the vulnerable. The stress fractures were widened in this particular case because the city, state, and federal governments were inadequately prepared. For some, Katina highlighted the racist nature of the United States. That is an easy and too simple an explanation. Experiences of disaster always reveal the differing abilities of the more affluent and better connected to escape. In most cases when a disaster is known beforehand those with the most resources have a better chance of avoiding, evading,

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or mitigating the effects of the disaster. That is less a structural flaw than a fact of social life. No, the structural flaw is not so much that race and class are predictors of the ability to navigate the tempests of life but that race, and class are so closely tied to issues of citizenship and the quality of the government response. Men of property drew up the constitution of the United States for men of property. They were concerned with minimizing the power of the state, especially if it trespassed on issues of private property and private wealth. A number of historians claim that the constitution can best be explained as a document designed to limit democracy and protect investors.33 The state was fragmented between different branches of government and there was little thought to the state intervening to offset inequalities of wealth and position. Government was meant to protect the existing conditions and not to change them, overturn them, or ameliorate their inequities. This was a fine liberal philosophy well suited to a republic emerging from the yoke of a foreign government and the rule of a distant king. It was a constitution enacted before the urban and industrial revolutions and the creation of the modern capitalist economy. But the longevity of the United States, very much with its late eighteenth-century constitution and attendant political debates intact, means that a political discourse that was very much a product of its time still dominates in a very different world. Elsewhere, in much of the rich world, late eighteenth-century constitutional arrangements and political debates have long disappeared, replaced by nineteenth- and twentieth-century political arrangements more suited to changing conditions and the basic acceptance of government welfare. Indeed, in some countries, such as the Scandinavian democracies, the principal goal of government is welfare. In the United States, the welfare of the poor has to be continually justified and it is easily reduced or threatened with eradication depending on the political winds. The claims of citizenship from the government are more constrained and constricted than claims on property protection. Poor racial minorities have an especially tenuous claim to the effective rights of citizenship. Their partial and sometime ineffective claim to citizenship rights is often dramatically revealed during disasters and calamities. New Orleans is a city where claims to citizenship are both invoked and denied. At the end of the Civil War the federal government imposed military rule in the city. A new state constitution, reflecting the power of the free blacks and recently enfranchised former slaves, guaranteed equal protection under the law for all citizens, old and new. Whites in the form

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of organized White Leagues resisted this reconstruction and seized power. The federal troops withdrew, and the white power elite created a racist system enshrined in state and local legislation and enforced through the savagery of lynching. The black elite, in turn, resisted, formed a citizens’ committee and in 1892 brought a test case to the courts. A member of the committee, Homer Plessy, who looked white but was officially designated as colored because he was one-eighth black, boarded a railroad car in New Orleans. He sat in the car reserved for whites, refusing to move to the car reserved for coloreds. Under an 1890 state law enacted to quite literally keep blacks in their place, his action was deemed illegal. A state court upheld the conviction, so Plessy took the case to the US Supreme Court arguing that the state law denied him rights guaranteed under the Thirteenth Amendment (abolishing slavery) and Fourteenth Amendment (ensuring citizenship to blacks and equal protection) of the US Constitution. In one of its most odious judgments, the Supreme Court, by a seven to one majority, upheld the constitutionality of the state law. Segregation, according to the majority opinion, did not constitute discrimination. The case of Plessy v. Fergusson gave legal justification for discrimination and segregation for over half a century more. It was only overturned in the courts with the Brown v. Board of Education decision in 1954. In the sole dissent to the decision, Justice John Marshall Harlan opined that the “Constitution is colorblind, and neither knows nor tolerates classes among citizens.” A hundred and three years later, in the same city that Homer Plessy boarded the train in his attempt to realize the full citizenship afforded by the constitution, the enduring limits of citizenship were again revealed. To be sure, there was a certain improvement over the intervening years giving proof positive to Martin Luther King Jr.’s assertion that the arc of the moral universe is long, but it bends upward. The government response to the plight of New Orleans’s black residents revealed the small bend of this arc. New Orleans is a microcosm of the urban United States that magnifies, often in extreme forms, the structural flaws of the nation: growing inequality against a background of limited government that results in an inadequate government response to a disaster. The disaster was not a natural disaster caused by unforeseen unpredictable events. It was the result of building a city in an area of environmental hazard, pursuing destructive environmental management that heightened the risk, failing to build and maintain the necessary infrastructure to protect the city, and doing little to help the most vulnerable

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citizens of that city. Katrina revealed basic flaws in our relationship to and management of the environment, our commitment to large-scale infrastructure construction and maintenance, and the limited claims of citizenship of the poor and needy on their governments. It was less a natural disaster and more a searing social indictment. The issue of global warming has so far failed to capture popular imagination in the United States. While the failure of the United States to ratify the Kyoto agreement was roundly condemned around the world as well as by many activists inside the United States, the issue never got much political traction. Neither major political party had to deal with a sufficiently powerful constituency to provoke a debate. For many, climate control smacked of foreign interference in US domestic policy. There was also the sense that global warming was a distant, rather esoteric issue. Global warming affects faraway places. Climate change was disconnected from even the major issues of mainstream progressive politics such as social justice, job security, or racial equity. Global warming was a vague issue unconnected to the “real” concerns of ordinary Americans. One of the consequences of Katrina is that the connection has been made plain and visible in a dramatic fashion. There is a connection, though not a straight line, from not reducing carbon and sulfur emissions to increasing global warming to increasing SST to increasing hurricane intensity to Katrina to the plight of poor people in New Orleans’s flooded Ninth Ward. Katrina showed that social justice and global warming are interconnected. The control of nature, especially in areas with increased risk of environmental hazards, is achieved only at tremendous cost and constant vigilance. Katrina revealed the costs of an environmental policy concerned with reducing cost and encouraging business rather than spending wisely and protecting lives.

Lessons Learned It is now over fifteen years since Katrina made landfall and wreaked such havoc on a major American city. It caused over $100 billion in damages and the deaths of almost 2000 people. It was not a natural disaster, it was a social disaster that revealed an infrastructure deficit, a city riven by race and class, poor disaster management and the consequences of global climate change. What lessons were learned? When the levees broke, more than eighty percent of the city flooded and over a thousand people died. One obvious lesson was that the existing

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levee system was inadequate. A $14 billion, 350-mile, decade-long program completed in 2018 strengthened the levee system. Congress mandated that the system should be built to withstand a 100-year flood. However, the earthen dams that constitute the majority of the levees are already beginning to sink just as sea levels are rising. The earthen levees are settling. Levee levels were based on 2007 calculations. But climate change is turning the 100-year flood into the 10-year flood. And the levee system requires constant maintenance and improvement. The Army Corps of Engineers recommended in 2019 that only a $3.5 billion, 50year plan could keep pace with sinking soils and rising sea levels.34 The city remains vulnerable to flooding. Levees continue to sink, sea level rises, major storms are now more common, and this major American city still sits at the mouth of a huge river system, sited below sea level in the path of hurricanes. The large levee-building program is barely keeping pace with the rising risks. Every four years the American Society of Civil Engineers (ASCE) produces an infrastructure report card to provide an assessment of the nation’s infrastructure. It breaks the nations’ infrastructure down into 16 different categories and gives a report on each one as well as a collective score. Throughout the twenty-first century, the collective grade has never risen above a D. According to the ASCE that grade signifies below standard infrastructure with significant deterioration and a rising risk of failure. The highest grade for any infrastructure category was a C+ for bridges. Levees did improve slightly but only from a D- in 2009 to a D in 2017. We would expect a society of professional civil engineers to promote more infrastructure investment. However, there is other confirming evidence. According to the World Economic Forum’s global competitiveness report for 2019, US infrastructure was ranked 13th in the world behind Singapore Netherlands, and Hong Kong. This was a drop from 9th in 2018. Overall, it is a dismal picture of deteriorating and declining infrastructure that in the time of climate change poses real challenges to economic efficiency, national competitiveness and basic security, The infrastructure deficit so dramatically revealed in Katrina and in subsequent and numerous infrastructure failures has scarcely been addressed.35 Disaster response in the wake of Katrina has improved. The tracking of hurricanes has reached incredible levels of sophistication, so we now have more warning about their track, timing and intensity of storms. We now have accurate hurricane forecasts. After the disaster of Katrina,

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the leadership of FEMA became less of a political appointment. No more well-connected horse show judges were appointed to lead disaster responses. People with emergency management experience filled leadership roles. Social media also allowed people in a disaster emergency to connect more and obtain up-to-date information from friends and families as well as government agencies. Congress also gave FEMA the ability to move resources to areas before a storm. The federal response shifted from waiting for formal requests to anticipating requests. Problems still remain. The Department of Homeland Security, of which FEMA is a part, is still dominated with issues of terrorism and border security. FEMA can respond to disasters but is still not charged to deal with the differing vulnerabilities to disasters. While FEMA has many limitations, it has upped its game since Katrina.36 At least in the mainland of the United States. The experience of Puerto Rico in Hurricane Maria tells a Katrina-like story. In 2017 a category 5 hurricane rampaged through the Caribbean. It flattened Dominica and made landfall in Puerto Rico as a punishing category 4 storm. The power grid was destroyed leaving 3.4 million residents without power. The federal response was late, limited, and botched. Three months after the storm, one in two islanders did not have power or tap water. A study by researchers at George Washington University found that almost 3000 people died after the hurricane due to the lack of power, fresh water, and access to services.37 Once again, a hurricane revealed not just the power of nature but the nature of power. The federal disaster response reflected the island’s position as a neo colonial legacy of Empire, not quite American enough to deserve the full force of a timely, well-funded, and well-organized federal response. Hurricane Katrina revealed the cleavages of race and class. The same cleavages were evident in the rebuilding of the city. The population of the city, that was close to 500,000 in 1990, fell to just over 200,000 in 2006 as people were forced to leave the city. By 2020, the population had rebounded to 390,000, a little less than 80 percent of the preKatrina population. The city became whiter as there were 90,000 fewer Blacks after Katrina. The predominantly Black Lower Ninth Ward still remains relatively empty. Hurricane Katrina became an agent of gentrification as younger, whiter, more affluent non-child households replaced the poor, Blacks and those with families. Post-Katrina New Orleans had less affordable housing. It became a more segregated city with the lowincome, low-lying neighborhoods increasing their proportion of Blacks

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while the higher altitude hence safer, traditionally Black areas became more majority-White. If the storm laid bare the race and class divides in the city, the rebuilding reinforced them.38

Climate Change as A Major Stress Test Katrina was not the first major hurricane of the twenty-first century, but it was one of the more dramatic. It was only a taste of things to come. Climate change is one of the greatest stress tests facing the United States. The stress is increasing as climate change accelerates. It is apparent across the country. I write these lines in the late summer of 2020, when a line of tropical storms is forming a superhighway of possible hurricanes across the warm Atlantic and the arid West is on fire and there are apocalyptic images of burned-out buildings and appalling air quality wreaths San Francisco and Los Angeles with choking air. Our planet is warming due to greenhouse gases and the consequences include more extreme weather events such as wildfires and hurricanes.39 There is the increasing prevalence of wildfires in the broad sweep of the West ranging from California through the Canadian Rockies into the boreal forest of interior Alaska Over the last few decades, and especially since 2000, the wildfire season is getting longer with more fires, bigger fires and more damaging fires. More than 5 million acres were destroyed in the boreal forests of Alaska in one recent season. In 2017 in California, one major fire north of San Francisco and another north of Los Angeles killed 45 people, burned more than half-million acres and destroyed over 2000 structures. In 2018, fires again devastated large areas of California. In 2020, 3.2 million acres had burned by the middle of September. There were multiple fires including the largest wildfire on record, known as the August Complex. It was a composite disaster as fires blazed all along the West coast. The wildfires were fueled by tinder-like conditions and high winds. Climate change is making the West hotter, drier, and more flammable. The higher temperatures wick away moisture from the trees making them more vulnerable to fire. The combination of the buildup of combustible material and a hotter, drier climate leads to more fires.40 There are also other factors. Forest management policies that promote the suppression of fire can lead to a buildup of flammable material in the forest. Local resistance to burning is another reason behind the buildup of flammable forests. Developers often resist regulations that make buildings more fire-resistant, as they increase costs. Local authorities often encourage residential development to increase the tax base

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and then offload fire costs onto the federal government. There are more people now living in the wildland–urban interface (WUI). In an uninhabited forest regular fires are a part of the natural ecological cycle and clear the brush. There are certain types of vegetation in this region that regenerate through fire. But when more people buy expensive homes and live in the WUI, then forest fires are suppressed leading to the buildup of the flammable brush and vegetation. Fires, when they do break out, then tend to be larger, more destructive and more difficult to control. More people living close to forests also raises the risk of accidental fires. The cost of protecting people and property in the WUI is so expensive it has shifted the priorities of the US Forest Service. So much money is spent on protecting property from megafires, that programs for preventing wildfires, protecting habitats and wildlife are much reduced. In 1990, firefighting accounted for only 13 percent of the Forest Service budget, now it eats up more than half.41 In 2020, California had at one time 28 major fires. In the state of Washington, more than 600,000 acres burned, the largest area since the 2015 historically high season. In Oregon, over one million acres burned. The conflagration as 2020 was not an exception but part of the growing probability of devastating fires. By 2025, the area expected to burn in the West will most likely double. In the case of hurricanes, increasing SST is also the backdrop to the increasing intensity of hurricanes around the world and along the US’s Atlantic and Gulf coasts.42 Average SST in the Caribbean is now averaging 2F degrees above historic monthly maximums. Increasing SST is making hurricanes, and especially major hurricanes, more likely. The water is warmer and stays warmer for longer, thus effectively increasing the amount of fuel for hurricanes and the time available for hurricane formation. On average there are 8–10 storms in the Atlantic in the typical season. Since the mid-1990s there has been an average of 15–16 a year. They are growing in intensity. In 2004 alone five big hurricanes, Charley, Frances, Ivan, Jeanne, caused $42 billion worth of damage. Hurricanes can also maintain their power as they move further north. Hurricane Sandy’s destructive power in October–November 2012, as it moved through the Caribbean and along the Atlantic seaboard, was in part due to warmer SST that meant it could retain its power causing storm damage to New Jersey and New York. What was once only a one in a hundred years event is now turning into a one in twenty or even tenyear event. The 2017 hurricane season was one of the most active when Hurricane Harvey, a category 4 storm hit Texas and Louisiana in August.

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Over 51 inches of rain deluged the city of Houston flooding 100,000 homes and causing $200 billion worth of damage. We should be careful to use the term natural disaster in this case. Flood damage was exacerbated by a lack of land use planning that allowed a steady conversion of permeable surfaces into the impermeable surface of roads, cement and concrete. Floodwater had nowhere to go as the city’s unplanned growth transformed the urban landscape from green to grey. Flood damage was caused by heavy rainfall falling on square miles of impermeable surfaces. Hurricane Irma slammed South Florida in early September with another Category 4 storm that had rampaged through the Caribbean. Later that same month, Hurricane Maria reached category 5 with wind speeds of 160 mph devastating Puerto Rico. Even before its end, the 2020 hurricane season featured 24 tropical storms, 8 hurricanes, and two major hurricanes. Hurricane Laura devastated parts of Texas and was the strongest hurricane to make landfall in Louisiana’s long history of hurricanes. Hurricane Sally made landfall in Alabama and dumped 20 to 30 inches of rain. Increasingly, larger hurricanes are stalling for longer over land, dumping two to three feet of rainwater in a two- to three-day deluge. It will take some time for the final bill of 2020 to be assessed. It will probably surpass 2017 that was the most expensive year for weather disasters in the United States when three major hurricanes, wildfires, flooding, tornadoes, and drought brought the total bill to $306 billion. The previous high was $215 billion in 2005. These costs estimated are adjusted for inflation; so, they represent a real and substantial increase. Wildfires alone in 2017 cost $18 billion, triple the previous record. Weather is not the same as climate, but climate change increases the risk of extreme weather events. Climate change is real, and it is increasing the risk of extreme events. Katrina was an early stress that revealed all kinds of cracks in the federal response. We have to accommodate to the changing nature rather than assuming it can be tamed or worse, ignored. We need to rethink our relationship to this new normal, and actively promote climate change adaptation and mitigation. The cost of not doing so will be very high. Katrina was not an isolated event, but an early warning of what the near future will look like. The lesson to be learnt is that climate change is real and can be deadly. Particular policies need to be devised and implemented. But above all, there needs to be a realization that we are living in a role of climate-induced change and uncertainty. The sooner that this

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becomes an accepted fact at all levels of government, the sooner we can imagine and then implement appropriate and creative responses.

Notes 1. Glasser, S. B., & Grunwald, M. (2005, September 11). The steady build up to a city’s chaos. The Washington Post, pp. A1 and A6. 2. Hartman, C., & Squires, G. (Eds.). (2006). There is no such thing as a natural disaster. Routledge. 3. Dessler, A. E., & Parson, E. A. (2019). The science and politics of global climate change: A guide to the debate. Cambridge University Press. 4. Emanuel, K. (2020). Evidence that hurricanes are getting stronger. Proceedings of National Academy of Sciences, 117 , 13194–13195. 5. Emanuel, K. (2005). Increasing destructiveness of tropical cyclones over the past thirty years. Nature, 436, 686–688. Saunders, M. A., & Lea, A. S. (2008). Large contribution of sea surface warming to recent increase in Atlantic hurricane activity. Nature, 451, 557–560. 6. Webster, P. J., Holland, G. J., Curry, J. A., & Chang, H. R. (2005). Changes in tropical cyclone number, duration and intensity in a warming environment. Science, 309, 1844–1846. 7. Saunders & Lea. (2008). Large contribution of sea surface warming to recent increase in Atlantic hurricane activity, 557–560. 8. Holland, G. J., & Webster, P. J. (2007). Heightened tropical cyclone activity in the North Atlantic: Natural variability or climate trend. Philosophical Transactions of the Royal Society, 365, 269–2716. The understanding of the periodicity of hurricane activity is fragmentary; we do not have long runs of accurate data on which to base our models. We would ideally have data for the past 5000 years, whereas we only have about 150 years of good quality data. The truly accurate data is only around 70 years old. And even this data has been collected using different methods, sometimes based on flight observations, other times and predominantly more recently on satellite images, making even short-run comparison very treacherous. From the short-run data that is reliable we know that the period from 1947 to 1969 was particularly active regarding hurricanes striking the US mainland at approximately 10 hurricanes each year with just over 3 of them above Category 3 status. From 1970 to 1987 the average total of hurricanes was 8 with only 155 of them at the 3, 4, or 5 categories. One atmospheric scientist, William Gray, linked Atlantic hurricane periodicity to fluctuations in West African rainfalls. The increased hurricane activity is directly associated with the periods of greater rainfall in the western Sahel region of northwest Africa. Wet periods in these regions are associated with years of more hurricane

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activity. Gray’s paper was published in 1990, and he predicted that the breaking of the long 18-year drought in the western Sahel would lead to increased hurricane activity through the rest of the 1990s and into the twenty-first century. And that is just what has happened. From 1991 to 2004, 23 hurricanes have made a landfall in the United States, and 8 of them were major hurricanes recorded at Category 3, 4, or 5. Gray, W. (1990). Strong association between West Africa rainfall and US landfall of intense hurricanes. Science, 249, 1251–1256. A word of caution: the increasing number of hurricanes may be due in part to better monitoring. With more sophisticated remote sensing techniques from radar, satellites, and planes, we can now identify tropical storms that in the past would have gone unrecorded. Without this modern technology, storms that take place far out in the sea are unknown or the fact that they do not make a landfall is the liquid equivalent of a tree falling in an empty forest; no one feels it. Tropical Storm Lee reached wind speeds of 40 mph, but it was a brief event, from August 28 to September 2, 2005, in the very middle of the Atlantic Ocean, which was only made known by sophisticated remote sensing equipment. Hurricane Philippe, a Category 1 hurricane, was an event of short duration that took place entirely in the Atlantic Ocean, from September 17 to 24, 2005. The number of storms may be no more than in the past: the seeming increase is partly a function of better storm monitoring. However, there is also the issue of rising intensity. There was a total of 30 storms throughout the 2005 season, seven of them at or above Category 3, including Dennis (Category 4), Emily (4), Katrina (5), Maria (3), Rita (5), Wilma (5), and Beta (3). It was also one of the most severe seasons on record. Hurricanes Wilma and Rita both reached wind speeds of 150 mph. The severity of storms is increasing. Hurricane Sandy’s destructive power in October–November 2012 as it moved through the Caribbean and along the Atlantic seaboard was in part due to global warming that increases sea surface temperatures that in turn lengthens the hurricane season and increases the intensity of storms. Holladay, J. S., & Schwartz, J. A. (2010). Flooding the market: The distributional consequences of the NFIP. Policy Brief No. 7. University School of Law. Fischetti, M. (2001) Drowning New Orleans. Scientific American. http://pan.intrasun.tcnj.edu/501/sharing/Extra/Scientific%20Amer ican_%20Drowning%20New%20Orleans.pdf. Accessed July 1, 2011. Coalition to Restore Coastal Louisiana. (1999). No time to lose: Facing the future of Louisiana and the crisis of coastal land loss. http://www.crcl. org/images/Pub_NTTL_Report.pdf. Accessed 5 Mar 2011. Mayer, J. (2005, September 19). High stakes. The New Yorker, pp. 37–38.

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14. Barry, J. (1998). Rising tide: The great Mississippi flood of 1927 and how it changed America. Simon and Schuster. 15. Grunwald, M., & Glasser, S. B. (2005, October 9). The slow drowning of New Orleans. The Washington Post, pp. A1, A14–A15. 16. Independent Levee Investigation Team. (2006). Investigation of the performance of the New Orleans flood protection system in Hurricane Katrina on August 29, 2005. http://www.ce.berkeley.edu/projects/new orleans/. Accessed 2 July 2010. 17. Interagency Performance Evaluation Task Force. (2008). Performance evaluation of the New Orleans and Southeast Louisiana hurricane protection system. US Army Corps of Engineers. 18. http://www.infrastructurereportcard.org/. Accessed 4 July 2011. 19. Government Accountability Office. (2006). Preliminary observations regarding preparedness and response to Hurricane Katrina and Rita. Government Printing Office. 20. Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina. (2006). A failure of initiative (p. 134). Government Printing Office. 21. Banks, W. C. (2011). The legal landscape for emergency management in the United States. National Securities Studies Program Policy Paper. New America Foundation. Nathan, R. P., & Landy, M. (2009). Who’s in charge? Who should be? The role of the federal government in Megadisasters: Based on Lessons from Hurricane Karina. Nelson A. Rockefeller Institute of Government. Walters, J., & Kettle, D. (2005, December 20–25). The Katrina breakdown. Governing. 22. Weisman, J., & Abramowitz, M. (2006, August 26). Katrina’s damage lingers for Bush. The Washington Post, pp. A1, A6. 23. Times-Picayune. (2002, June 23–27). Special report: Washing away. 24. Bennett, J. (2005, December 23). Brown’s turf wars sapped FEMA’s strength. The Washington Post. 25. Cooper, C., & Block, R. (2006). Disaster: Hurricane Katrina and the failure of homeland security. Times. 26. Ingraham, J. (1835). The South-West by a Yankee. Harper. Martina, H. (1835). Retrospect of western travel. Saunders and Otley. Kingsford, W. (1858). Impressions of the West and South. Armor. 27. Lewis, P. (2003). New Orleans: The making of an urban landscape (p. 177). Center for American Places. 28. Metropolitan Policy Program. (2005). New Orleans after the storm: Lessons from the past, a plan for the future. The Brookings Institution. 29. Burns, P., & Thomas, M. (2006). The failure of the nonregime: How Katrina exposed New Orleans as a regimeless city. Urban Affairs Review, 41, 517–527.

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30. Zedlewski, Z. (2006). Building a better safety net for New Orleans (p. 4). Urban Institute. 31. FEMA was made part of the newly formed Department of Homeland Security in 2003. A large number of different agencies were folded into this one gargantuan department charged with defending the country against terrorism. The institutional refocusing of the formerly independent FEMA played a part in the slowness and inadequacy of FEMA’s response to Hurricane Katrina. A Congressional report noted that disaster readiness was hampered by an overemphasis on terrorism at the expense of “natural” disasters. Lister, S. (2005). Hurricane Katrina: The public health and medical response. Congressional Research Service. 32. Nolan, B. (2005, July 24). In storm, N. O. wants no one left behind. Times Picayune. 33. Holton, W. (2007). Unruly Americans and the origins of the constitution. Hill and Wang. See also Wood, G. (1969). The creation of the American Republic, 1776–1878. University of North Carolina Press. 34. Schleifstein, M. (2019). What it’ll take to raise New Orleans-area levees: $3.2 billion, 50-year plan, says Corp. Times-Picayune. https://www. nola.com/news/environment/article_a160ff42-1ace-11ea-bd3b-cbcf2a 74b089.html. Accessed 14 Sept 2020. 35. https://www.infrastructurereportcard.org/making-the-grade/. Accessed 27 Sept. 36. Roberts, P. (2017). 5 things that at have changed about FEMA since Katrina-and 5 that haven’t. The Conversation. https://theconversation. com/5-things-that-have-changed-about-fema-since-katrina-and-5-thathavent-83205. Accessed 14 Sept 2020. 37. Milken Institute of Public Health. (2018). Assessment of estimated excess mortality from Hurricane Mari in Puerto Rico. George Washington University. https://preview.tinyurl.com/yd83unyt. Accessed 21 Sept 2020. 38. Bentley, J. (2019). Pushed out: The changing demographics of New Orleans. The Big Easy. https://www.bigeasymagazine.com/2019/02/ 11/pushed-out-the-changing-demographics-of-new-orleans/. Accessed 14 Sept 2020. 39. Emanuel, K. (2018). What we know about climate change. MIT Press. 40. Williams, A. P., Abatzoglou, J. T., Gershunov, A., Guzman-Morales, J., Bishop, D. A., Balch, J. K., & Lettenmaier, D. P. (2019). Observed impacts of anthropogenic climate change on wildfire in California. Earth’s Future, 7, 892–910. 41. Short, J. R. (2015). The West is on fire—And the US taxpayer is subsidizing it. The Conversation. https://theconversation.com/the-west-is-onfire-and-the-us-taxpayer-is-subsidizing-it-47900. Accessed 22 Sept.

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42. Emanuel, K. (2020). Evidence that hurricanes are getting stronger. Proceedings of National Academy of Sciences, 117, 13194–13195. Marsooli, R., Lin, N., Emanuel, K., & Feng, K. (2019). Climate change exacerbates hurricane flood hazards along US Atlantic and Gulf Coasts in spatially varying patterns. Nature Communications, 10, 1–9.

Further Reading Barry, J. (1998). Rising tide: The great Mississippi flood of 1927 and how it Changed America. Simon & Schuster. Baum, D. (2010). Nine lives: Mystery, magic and death, and life in New Orleans. Random House. Boin, A., Brown, C., & Richardson, J. A. (2019). Managing Hurricane Katrina: Lessons from a megacrisis. Louisiana University Press. Brinkley, D. (2006). The great deluge: Hurricane Katrina, New Orleans and the Mississippi Coast. William Morrow. Dyson, M. E. (2006). Come Hell or high water: Hurricane Katrina and the color of disaster. Basic Civitas. Giroux, H. (2006). Reading Hurricane Katrina: Race, class and the biopolitics of disposability. College Literature, 33(3), 171–196. Hartman, C., & Squires, G. D. (Eds.). (2006). There is no such thing as a natural disaster: Race, class and Hurricane Katrina. Routledge. Horne, J. (2006). Breach of faith: Hurricane Katrina and the near death of a great American city. Random. Kelman, A. (2006). A river and its city: The nature of landscape in New Orleans. University of California Press. Knauer, K. (Ed.). (2005). Hurricane Katrina: The storm that changed America. Time. Kolbert, E. (2006, February 27). Watermark: Can southern Louisiana be saved? The New Yorker, pp. 46–57. Marable, M., & Clarkes, K. (Eds.). (2008). Seeking higher ground: The Hurricane Katrina Crisis. Race, and public policy reader. Palgrave. Seidman, K. (2013). Coming home to New Orleans: Neighborhood rebuilding after Katrina. Oxford University Press. Van Heerden, I. (2006). The storm: What went wrong and why during Hurricane Katrina. Viking. Woods, C. (Ed.). (2010). In the wake of Hurricane Katrina: New paradigms and social visions. Johns Hopkins University Press. Zakour, M. J., Mock, N. B., & Kadetz, P. (Eds.). (2018). Creating Katrina, rebuilding resilience. Butterworth-Heinemann.

CHAPTER 4

The Financial Crisis and the Costs of Neoliberalism

On a Sunday morning in April 2007 Matthew Tannin emailed a colleague. Tannin was a manager of two hedge funds operated by the New York– based financial company Bear Stearns. His colleague, Ralph Cioffi, was a fellow fund manager. Tannin wrote to Cioffii that the “entire subprime market is toast … we should close the funds now.”1 Cioffi removed $2 million of his personal funds from one of the troubled funds. The two men decided not to share their conclusions with fellow Bear Stearns workers or the investors in the fund who were promised annual rates of return not less than 12 percent. As the market for subprime mortgages collapsed, the hedge funds ran out of money and investors lost $1.6 billion, bringing the parent company to its knees and close to collapse. J. P. Morgan Chase subsequently bought Bear Stearns for $10 a share. At its height, the company had traded at $171 a share. The two fund managers were formally arrested on June 19, 2008, and charged with securities and wire fraud. Many were pleased to see the “perp” walk of the two funds managers handcuffed and surrounded by federal agents as they were taken to their arraignment in the Brooklyn federal court. The financial crash that was in full force in the fall of 2008 and which triggered the Great Recession in the United States and the Global Financial Crisis around the world, has two distinct narratives. The first is the avarice and greed of the financial sector. There certainly was enough of

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that. The same day that Tannin and Cioffi were arrested, FBI director Robert Mueller announced that in the previous three months, more than 400 people working in the mortgage and real estate industry had been charged with criminal offenses. Among those were eight people in Maryland, including former stripper Joy Jackson, president of the Metropolitan Money Store. Jackson’s company targeted African American homeowners at risk of losing their homes. From 2004 to 2007 the company promised homeowners that they would make the mortgage payments while the original owners continued to own and live on the property. In return, the homeowners signed over the management of the property to the company. Unknown to the original homeowners the company then refinanced the properties with an inflated appraisal and effectively stripped the properties of all their asset value. When the properties went into foreclosure the original owners were left with nothing but debt and a poor credit rating, while the company made over $10 million from 400 properties. Ms. Jackson was involved in a criminal conspiracy but seemed unwilling to pocket her ill-gotten gains in a quiet manner. Instead, she used the money for conspicuous displays of wealth, including furs, a Bentley, and a lavish wedding in June 2005 at the Mayflower Hotel in DC where, serenaded by Patti LaBelle, 360 guests gorged on lobster and guzzled Cristal champagne. The wedding cost $800,000. Four years later, she was sentenced to over 12 years in federal jail, ordered to pay $16.8 million in restitution, and made to forfeit three residential properties and three vehicles. Those at the very top of the financial system received giant compensation. In 2003 Angelo Mozilo, as head of Countrywide Financial Corporation that specialized in subprime mortgages, received $33 million in compensation as well as personal use of the company jet. The CEO of Goldman Sachs, Lloyd Blankfein, earned $54 million in 2006. He was paid $137 million over the previous five years. As unemployment reached historic levels and average incomes plummeted, Blankfein amassed $337 million worth of Goldman Sachs stock. High compensation related to increased productivity or enlarged sales/earnings is part of an efficient capitalism. But when the compensation continues during downturns and poor performance, we are in the realm of crony capitalism rather than an efficient market. Another, alternative narrative framed the financial collapse as a combination of simple human error, unforeseen consequences, and blind market forces. When Lloyd Blankfein appeared before Congress in January 2010,

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he used the analogy of a hurricane to describe the financial meltdown. How could you predict something as unpredictable as a blind force of nature? Of course, “no one could” was the implied answer. This argument stressed the unforeseen elements, the unpredictability of it all, and the bigger, almost anonymous, market forces at work. While a small amount of human error is sometimes afforded a role in this narrative, emphasis is placed on blind forces. Some believe this argument. Cioffi and Tannin were acquitted in November 2009. Jurors told reporters after the trial that the two men were being blamed for market forces beyond their control. The “beyond our control” narrative emptied the events of any morality and naturalized the crisis as if it were the result of honest mistakes and unforeseen unpredictable events. Of course, the main players in the financial systems liked the analogy of the hurricane: they were let off the hook. They were recast as victims of blind forces rather than villains; in fact, with a little tweak they are in fact heroes battling against the financial equivalent of a natural disaster. And the resulting conclusion and requisite policy response is that the system is inherently sound, perhaps needing some changes at the margins, but obviously not changing the lucrative compensation practices. The “fundamentals are sound” as President Bush kept declaring as the Dow Jones index plummeted from 14,066 on October 5, 2007, to 9034 on January 2, 2008, finally cratering at 6626 on March 6, 2009, as the unemployment rate kept rising to remain stubbornly around 10 percent, and as the housing market collapsed. One narrative criminalizes the crisis, the other naturalizes it: greedy bankers or the equivalent of a financial tsunami, avarice, or unforeseen and unforeseeable accident. While these two arguments are interesting, less for what they illuminate about the crisis and more for what they reveal about those making the argument, I will not employ them here. Rather, I will look at the deeper setting of the crisis. Greed, avarice, and theft are perennial manifestations of the human condition. What I am more interested in is the system in which these behaviors flourished. I am interested in the context for greed and corruption. Identifying sin is neither new nor novel. We live in a human, all too human, world. I am much more interested in identifying the structures, the context, and dynamics in which greed and corruption flourish. I want to uncover the structural flaws behind the financial collapse. Rather than understanding the fiscal meltdown as either evil financiers or as unavoidable acts of nature in a basically sound system, I will make the case that the fiscal meltdown

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reveals three structural flaws: the uncritical promotion of homeownership, the pervasive ideology of neoliberalism, and the enthronement of finance capitalism in a time of global deregulation. I will identify each of the strands separately and then pull them together in a narrative of their interactions in the lead up to the financial crisis.

The Promotion of Homeownership At first blush, it may seem odd to some readers to identify the encouragement of homeownership as a structural flaw. Isn’t that like criticizing mom and apple pie, the very embodiment of the American Dream? Yet, as I will show, the steady and unblinking encouragement of homeownership as the main, if not the only housing policy in the United States, is a crucial stress fracture exposed by the financial meltdown. At the beginning of the twentieth century less than one-half of all households in the United States were homeowners. Private renting was the majority form of housing tenure, and with good reason. Housing is expensive in relation to income, and immediate homeownership is beyond the reach of all but the wealthy without a large and extended credit line. And for lenders it is not a great proposition. You give large amounts of money to many individuals who repay over a relatively long term. That locks up your working capital for long periods of time. Lenders, without some form of protection, prefer to lend short term, not long-term; and smaller not larger loans; and to fewer not many borrowers. Lending to encourage mass homeownership is an inherently risky business. Prior to the Second World War only about half of all homeowners held mortgages, and they tended to be three- to five-year loans covering only 40 percent of the house’s value. Homeownership through purchase, rather than inheritance, was not possible for most of the population. It was simply too expensive. Homeownership was promoted, especially before the Second World War, as a bulwark against socialist leanings and communist ideas and as a stimulus to economic growth. Homeownership needed the help of big government. Governments promote homeownership because it stimulates the economy and chimes with the dominant ideology of private property ownership; it is a form of debt encumbrance whose repayment promotes work discipline and political conservatism, and it creates a nation of small property owners with a stake in the maintenance of the status quo and in

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the long-term stability of society. Homeownership maximizes consumption and hence stimulates economic growth. Homes are a veritable empty space to be filled up with consumer goods and services. Homeowners purchase domestic appliances, garden equipment, and a whole range of goods and services, which increases aggregate demand and boosts the economy. The early promotion of homeownership was easier in some countries. Australia, for example, with its endemic labor shortages and strong labor unions, which created relatively high wages in relation to housing, became one of the first countries to have a majority of homeowners in the 1940s, a decade before the United States. Despite constant claims to the contrary, homeownership is not a uniquely American Dream. Despite its advantages for the system as whole, it was and still is an expensive and risky proposition for most individual purchasers and lenders. Potential buyers needed persuasion. In 1918 the Commerce Department launched the Own-Your-Own-Home campaign. Pamphlets, buttons, ads, and lectures all pushed the same message: buy a house. More than 2 million posters were sent to workplaces all over the country. The campaign was vigorously promoted by Herbert Hoover, who, as both the secretary of commerce (1921–1928) and as president (1929– 1933), supported propaganda campaigns to promote owner-occupation as a moral issue as much as a housing issue. In 1922 the National Association of Real Estate Boards published a 20-page booklet, A Home of Your Own, which extolled the virtue of homeownership. It stated: A home is the most valuable of all possessions. It has greater influence over life and character and greater effect upon success and happiness than any other single thing that can be bought with money.2

As a result of the campaign and the booming economy, homeownership increased by 3 million in the 1920s. In the Great Crash of 1929, the mortgage market dried up and foreclosures increased as people lost their jobs and could not afford to make their mortgage repayments. In 1933 there were approximately a quarter of a million foreclosures. To stave off the worsening crisis, the Roosevelt administration created the Home Owners’ Loan Corporation (HOLC) in 1933 so that, as the president told Congress at the time, “safeguards should be thrown around homeownership as a guarantee of social and economic stability.” The HOLC gave loans to refinance mortgages and

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introduced a 15-year mortgage to make it easier for ordinary households to become owner-occupiers. In 1934 the Federal Housing Administration (FHA) was created to stimulate construction. The FHA insured long-term mortgages and worked to establish a new industry standard of 25-year mortgages with only 20 percent down payment. This was just the beginning of a steady and relentless promotion of homeownership by the government and private industry. The government worked to make mortgage lending easier for buyers and less risky for lenders. In 1938 the FHA insured 25-year loans with only 10 percent down payments. The same year, a new agency, the Federal National Mortgage Association, or Fannie Mae as it is generally known, was created to make the mortgage market even more liquid by buying mortgages from banks during credit shortages and selling them back during gluts. Support for homeownership increased dramatically after the Second World War. Under the GI Bill, returning veterans were eligible for nodown-payment loans. From 1944 to 1952 the Veterans Administration (VA) allocated 2.4 million loans under this scheme. By 1972 the FHA and VA helped 11 million families buy houses, revolutionized the homeloan industry, and widened access to homeownership.3 There were also changes in tax policy. In 1951 capital gains from selling a home could be rolled over into the purchase of another home. Homeownership became a central element in economic growth. Largescale house building was an important part of a growing economy built around high mass consumption as millions of new owner-occupiers purchased domestic appliances, garden equipment, furniture, cars, and the whole range of consumer durables necessary to maintain a suburban home. Homeownership was also an important vehicle for the creation of the new middle class. A home of your own in the suburbs embodied upward mobility, economic success, and social respectability. The move to the suburbs, the twentieth-century equivalent of the nineteenth-century westward expansion, marked individual and national progress. The United States became a nation of homeowners and owner-occupation was now a vital motor of economic growth and a symbol of economic success. By 1960, 62 percent of households were homeowners. With government help and vigorous private markets in house building and mortgage lending, homeownership was now central to the vitality of the US economy, the creation of the middle class, and the construction of a property-owning democracy. Both Republicans and Democrats were now

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united in their commitment to homeownership. Fannie Mae was rechartered in 1968 as a government-sponsored enterprise (GSE) to pump even more liquidity into the mortgage market. And in response to the credit squeeze of the late 1960s another GSE, Freddie Mac, was also created to purchase mortgages. Government created these fiscal lubricants so that mortgages could be bought and sold to provide enough liquidity so that the market demand could always be financed. The basic fiscal problem of long-term mortgages locking up capital for long periods was solved. The expansion of homeownership created a vast interest group, the very powerful house building-selling-mortgaging industry. The constellation of builders, realtors, and mortgage lenders continually lobby the government to promote and defend homeownership. When the Reagan administration sought to eliminate the tax relief from mortgage interest, the industry groups successfully lobbied to keep the tax benefit. Mortgage interest was the only deduction retained in the sweeping 1986 Tax Reform Act, on the basis that it would encourage homeownership. Today, one of the single biggest contributors to political action committees of those running for public office is the National Association of Realtors. Fifty-five percent of their total political contribution goes to Democrats and 44 percent goes to Republicans. In terms of total contributions, the American Bankers Association is the sixth largest and the National Association of Home Builders is twentieth largest, both giving more than two-thirds to Republicans. The house building–homeownership lobby is large, rich, and very powerful. Then there were the homeowners themselves, now a vast population reliant on direct and indirect government subsidies. Fiscal incentives now include tax relief on mortgage interest repayments and no capital gains tax for profits on house sales of over $500,000. In 2006, at the peak of the housing boom, these two subsidies amounted to tax expenditures of $112 billion.4 These are among the most regressive subsidies, aiding wealthy and upper-middle-income more than middle- and lower-income households. Homeowners are a privileged population, but in the hard realities of US politics their privileges are almost enshrined as rights. Unlike private renting, homeowners not only have a form of accommodation, they also have a vehicle for wealth creation. Increasing house prices and/or shrinking principal permit owners to realize gains when they sell their house. We can make a distinction between the use value and exchange value of a good. Use value is the utility that we get from a good. In the case of housing this includes shelter from the elements and

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the sense of home. But homeowners also get exchange value—the ability to make money from selling it. As house prices rise or fall, the exchange value of housing becomes a more significant factor than its use value. Federal policies were structured so that the alternatives to homeownership were very unattractive. Public housing is only available to the very poor, not for all. Private renters get no tax breaks while owner-occupiers get tax relief mortgage interest payments, relief from capital gains, and the possibility of exchange value. Homeownership was so privileged that the disparities in participation— most owner-occupiers were white and more affluent—eventually became a battleground for social justice. African Americans and Hispanics have far lower rates of homeownership. Three-quarters of white households are homeowners, but less than half of all African Americans households. The poor and minorities were kept out of the possibility of the appreciating exchange value of owning your own home and thus had less opportunity for wealth creation and asset formation. And their neighborhoods, deprived of the lifeblood of cheap and subsidized mortgages, could more easily slide into disrepair and decay. The political right as well as the left adopted promotion of homeownership as a policy, as it combined concerns of creating a property-owning democracy with issues of social justice and racial equity. A compelling orthodoxy emerged that homeownership should be extended. As with all orthodoxies, the inherent problems were glossed over and competing alternatives marginalized and ignored. There was no effective counter to the promotion of homeownership. The entire political establishment bought into the notion that homeownership was a good thing and needed to be extended down the income scale and across the racial divide. When everyone in power agrees, be wary of the eventual outcomes because there is no real debate over the costs as well as the benefits, the dangers as well as the opportunities. Politicians and administrators could now justify all sorts of actions and behaviors if successfully wrapped around the taken-for-granted all-agreed-good-thing of encouraging homeownership. When everyone in power agrees on one policy, look out, because with no countervailing force there are few checks or balances and little attention to the full costs of its implementation. The policy acts as a national flag wrapped around all manner of things, used to justify and legitimize all sorts of actions. Risks are justified and tolerated by the claim that they make homeownership more affordable. Yet this policy also offers, just as patriotism often can, a “refuge for scoundrels.”

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Over the past 40 years the policy of extending homeownership continued apace. The Housing and Urban Development Act of 1968 made it easier for lower-income households to obtain mortgages and allowed the FHA to insure mortgages in older residential areas. In 1975 the Congress passed the Home Mortgage Disclosure Act in response to evidence that banks were not lending in inner-city minority neighborhoods. Two years later the 1977 Community Reinvestment Act prodded banks to lend in inner-city communities. Promoting homeownership became a national fixation. With successive administrations pushing to increase the rate of owner-occupiers, homeownership became the single goal of US housing policy while public housing was reduced to a warehousing of the poor. Private renting was neglected at the federal level, although some cities maintained successful rent control policies. In 1992 Congress mandated Fannie Mae and Freddie Mac to increase mortgage availability to low- and moderate-income groups. Because housing is especially expensive in relation to income, those with lowto-moderate incomes require higher loan-to-income ratios. In 1994 the Department of Housing and Urban Development (HUD) established a “best practices” initiative to encourage private lenders to increase access to ever lower-income borrowers. Traditional conforming mortgages require down payments of at least 10–20 percent of the value of the property, a history of creditworthiness, and evidence of the financial ability to repay the loans including local property taxes, property insurance, and the maintenance and repair of the property. These are high hurdles if you want to promote homeownership past 60 percent of the population and especially if you want to reach 70 percent, because that last 10 percent of the people have less capital and lower incomes. To cater to this sector of the extended market, subprime mortgages require less of a down payment and also make those with spotty credit history eligible. In the process, low-income earners were made eligible for housing mortgages. Private companies created a market for these subprime loans in the 1990s. Fannie Mae and Freddie Mac began to purchase subprime mortgages to meet mounting criticism of their risk avoidance and lack of commitment to extending homeownership, as well as to cash in on this lucrative market. By 2006, 23 percent of all new mortgages were subprime. But wasn’t the extension of homeownership through subprime mortgages inherently risky? Issuing credit to people lacking credit worthiness flies in the face of even the most rudimentary knowledge of finance. Wall

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Street and the GSEs had a magic wand to wave at this problem to make it go away: it was called securitization. We will discuss this in more detail later. For the moment let’s place it in the wider context of the ideology of neoliberalism. A key component of this ideology is the demand for deregulation. To be more accurate, it should be described as reregulation, shifting government regulations to a more pro-business stance. Deregulation was becoming less a legitimate policy alternative and more a statement of truth akin to a religious faith just in time to worsen the financial meltdown of the Great Recession.

The Rise of Neoliberalism Empire is a big story that dominates the United States. The Empire defines the United States in the modern world, its character, government policies, internal politics, and external relations. There is, however, another metanarrative that plays an increasing role in the internal politics of the country, neoliberalism. It arises, like most ideologies, from a clash of ideas. Two broad movements of political thought developed in the twentieth century influence our political ideas at the beginning of the twenty-first century. The first was the recognition of the need for government involvement. The economic depression of the 1930s not only created mass unemployment, but also undermined traditional ideologies. The invisible hand of the free market was not working. That it promised to solve the problem over the long term, as enunciated by free marketeers, provided little comfort to people rendered unemployed for years or for businesses long mired in a depression. The political response to the Great Depression varied around the world. The lure of fascism in Germany and Italy, for example, resided in its promise to solve the economic crisis with a form of economic corporatism and aggressive nationalism. Elsewhere in Europe, social democratic coalitions curbed the power of the market and promoted the redistributional role and welfare function of government. Although Roosevelt entered the White House in 1933 with no fully articulated set of policies, what emerged from his four administrations was a belief that government could dampen the damaging fluctuations of boom and slump with their associated social upheaval, provide a better regulatory framework to curb the worst excesses of business, soften the harsh edges of capitalist society, and provide a safety net for those falling from economic grace. This movement, the New Deal-Keynesian movement,

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named after its public policy expression in the United States and its prime economic theorist, John Maynard Keynes (1883–1946), who argued for the benefits of government spending to ward off depression and recession, was to dominate political thinking and government practice in the United States and throughout most of the Western world for the next 45 years. From 1933 to the mid-1970s it was the dominant political ideology. It relied on a deep and wide taxation base, a commitment to a redistribution of wealth through progressive taxation, and a belief that government could fine-tune the economy and solve many social problems. The government was a solution to social and economic ills of the society. Its appeal was strongest in societies with popular left-wing parties and strong and organized labor. It was always weaker in the United States, where ideas of individual rights often trumped collective goals, and the main source of progressive policies, the Democratic Party until the 1970s, was lukewarm in its pursuit of universal coverage because of its racist support in the South. The US labor movement was concerned more with promoting the interests of its members than with promoting social justice for all citizens. In the United States then, the commitment to New Deal-Keynesianismwas more lukewarm than in Western Europe and especially in contrast to the Nordic democracies. Political ideologies in the United States were much more informed by classical liberal commitments to markets rather than governments. Keynesianism had its limits and constraints. Ever-increasing taxation with the limited power of government to solve social issues led some to eschew not only specific policies but also the very idea of social policies. Some social problems proved intractable. Taxation increased to cover government expenditures. The tide began to turn in the 1970s, when the long postwar boom ended, and organized labor lost its power. Slow growth and increasing inflation highlighted the limits of Keynesianism. The old relationship between government spending and maintaining full employment was undermined by the crisis of stagflation. In order to maintain spending at optimum levels, the government had to keep printing money: in a slow-growth economy that meant inflation as well as economic stagnation. New Deal-Keynesianismhit a hard rock and began to flounder. A new ideology took shape: neoliberalism. It had a number of strands and a long history. There were the classical economists of the eighteenth century such as Adam Smith who believed in the invisible hand of the market to make things work. Then there were the contrarians

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who always resisted the rise of New Deal-Keynesianism. Theorists of this new economic ideology included Friedrich Hayek (1899–1992), who, in his 1944 book, The Road to Serfdom, argued against centralized government planning. Milton Friedman (1912–2006), a Nobel Prize–winning economist, also lauded the virtues of free markets and small, limited governments. His book, Free to Choose, published in 1980, linked individual freedoms with functioning markets and restrained governments. In this restated neoliberalism, unregulated markets were the solution, and governments were the problem. Neoliberalism was always part of broader political ideologies of conservatism. Perhaps the first truly conservative politician to reach the national stage at this time was Barry Goldwater. He was a long-term senator from Arizona who stood against Johnson in the 1964 presidential campaign. Goldwater’s political philosophy is mapped out in his 1960 Conscience of a Conservative, a book that promotes the idea of limited and small government and a firm belief in states’ rights. Goldwater voted against the 1964 Civil Rights Act on the constitutional grounds that it was a federal subjugation of states’ rights. Goldwater spoke of the oppression of government and uttered the famous lines, “extremism in the defense of liberty is no vice” and that “moderation in the pursuit of justice is no virtue.” Goldwater was successfully portrayed as an extremist. His fiery Cold War rhetoric and his conservative views did not gain much traction. He lost in a landslide, garnering less than 40 percent of the popular vote. Although Goldwater is now revered by the contemporary conservative movement in the United States, his beliefs are more complex than the term “conservative” presently covers. He was as much a libertarian who was appalled by religious extremism and did not see gay rights or abortion as conservative issues. He was for small government especially in relation to peoples’ private lives. A libertarian conservative is the more appropriate term to cover the complexity of his views. Goldwater was unsuccessful, but he paved the way for more successful politicians such as Ronald Reagan, who successfully pushed a neoliberal agenda of reduced taxation, small government, and deregulation. In his first inaugural address delivered on the west front of the US Capitol on January 20, 1981, Ronald Reagan said, “In this present crisis, government is not the solution to our problem; government is the problem.” He promoted the neoliberal agenda of privatization of public goods and services, of reduced taxes especially for the wealthy,

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of reduced governmental commitment to the welfare of its ordinary citizens, and of emphasis on enhancing corporate profitability and improving business competitiveness. This agenda’s core proposition is that deregulated markets will increase economic growth and raise living standards. Neoliberalism as a political theory has the benefits of being simple, easily understood, and even easier to articulate. The slogans are easy to invoke: free markets mean a free people; deregulated markets generate growth; getting the government off our backs lets innovation flourish. The phrases slide off the tongues of even the dimmest politicians. As a political practice, however, its greatest difficulty lies in implementation when it comes up against the brute realities of mature markets dominated by powerful sectional interests. These interests promote free trade when it meets their needs, but not when it undercuts their power and market share. The tenets of neoliberalism are breached regularly in the face of political realities. Elaborate subsidies and tariff barriers, for example, favor agricultural producers in the United States. When the market gets into real trouble, it wants and needs the government to come to its rescue. Size does matter. It is the problem of the company when a very small company fails, but when a huge financial institution fails, that becomes a problem for all of us. Neoliberalism is now entrenched in the United States. New DealKeynesianismalways had less support than in Western Europe and was thus easier to criticize and undermine. In Europe the arguments are about coping with the welfare state, in the United States legitimate politicians talk about dismantling it. Although there were many differences within the often-competing sets of ideas in neoliberalism, the shared principle was the belief that government was the problem; to be precise too much government and too big a government was hindering economic growth. There was one exception to this credo: military spending. The criticisms of big government stopped well short of the military-industrial complex. Empire trumped the neoliberal agenda. In effect, the conservatives supported and promoted the big government of military spending. It was a Keynesianism of military khaki and armaments firepower. At the beginning of the twenty-first century the United States followed a Keynesianism policy of vast government spending on the military to maintain the commitment to Empire while pursuing a neoliberalism with regard to domestic infrastructure spending and regulation of business, including banking and oil extraction. Some of the consequences of this

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policy play a role in the deferment of infrastructure investment, the deregulation of business at a time of increasing risks, and the regulatory capture of public agencies by private interests.

The Rise of Financial Capitalism and the Decline of the Regulatory State Modern economies rely on credit and financing. Households, institutions, companies, and governments need to borrow money to finance their expenditures and continue their operations. Credit is vital to the smooth functioning of a complex economy. Institutions that provide capital and credit are clearly important to the entire system, but in the past 40 years the financial sector has grown very large and very powerful. And it has used that power and influence to promote and defend financial deregulation. In the early twentieth century, the Austrian economist Rudolf Hilferding proposed that a new form of capitalism was taking hold. In Finance Capitalism (Das Finanzkapital, 1910), he explained that the increasing concentration of economic activity and banking into larger and larger combines was effectively producing a new form of capitalism, finance capitalism. Because this new form of capitalism controlled the flow of investment, he suggested that it was displacing competitive industrial capitalism while creating a demand for a centralizing and “privilegedispensing state.” According to Hilferding, finance capitalism was always on the lookout for state intervention to prop up its wealth and privilege. Does this not sound familiar? Fast-forward a century, and we witness Hilferding’s prediction turning true. The financial sector in the United States has grown both absolutely and relatively, now occupying a position of centrality and dominance. In 1980 it was 5 percent of GDP, but by 2005 it was closer to 8 percent. The sector was responsible for only 15 percent of corporate profits in 1980, but that figure reached 33 percent in 2003. Not only was the sector as a whole growing in size, but so were the individual firms. By 2007 Citigroup had $2.2 trillion in assets while Goldman Sachs had assets worth $1.1 trillion. With this concentration of capital came increased compensation. By 2007 compensation in the financial sector was 80 percent greater than in other business sectors. Prior to that they were approximately equivalent.

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The shift is evident in the massive amounts of money being made. Lloyd Blankfein, the CEO at Goldman Sachs, received compensation of around $68.5 million for fiscal-year 2007, while the CEO of JP Morgan Chase, Jamie Dimon, received $28 million. Lots of people make lots of money in this sector, and as we now know it is neither connected to their skill in assessing risk, nor foresight in managing change and economic uncertainty. The compensation reflects itself: people get paid a lot, not necessarily because they are any good, but because they can get paid a lot, as they are in the financial sector. And the sector binds government to its needs and requirements through the slick passages of individuals who move effortlessly and often from finance to government and vice versa. There is a revolving door of people moving from major financial institutions to senior government positions and back again. Consider the case of Robert Rubin, who worked at Goldman Sachs for 26 years before becoming Treasury secretary under Clinton. He worked furiously to promote deregulation before moving on to Citigroup, where his eightyear tenure netted him $126 million in cash and stock. Hank Paulson also worked in government before moving to Goldman Sachs, where he rose to become its CEO. From this position he successfully worked to release Goldman Sachs from rules stipulating a capital reserve that reduced risk and exposure and lobbied to reduce regulatory oversight. In 2006 President Bush appointed him as Treasury secretary. At the time his net worth was valued at around $600 million. He initially repeated the chant of more deregulation equals greater efficiency but then, after years of calling for less government regulation and involvement in the financial markets, in 2008 he led the effort to give $700 billion of taxpayer money to financial institutions. Goldman Sachs received $10 billion in the scheme. These moves transcend party affiliation: Paulson moved from Goldman Sachs to the Treasury as secretary under the Republican Bush; Rubin, moved from Goldman Sachs to the Treasury under the Democrat Clinton and to Citigroup after deregulating the banking system. Rubin’s colleague at the Treasury, Larry Summers, moved from a lucrative hedge fund gig to advising Obama. Peter Orszag was director of the Office of Management and Budget under Obama for less than two years before joining his old boss Robert Rubin as vice chairman of Global Banking at Citigroup. The revolving door connects the world of finance with the government. The former chief economist at the IMF, Simon Johnson, writes of a quiet coup as the finance industry hijacks the US government.5

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The financial sector employs 3000 lobbyists and marshals billions of dollars to influence Congress. The effort has paid off handsomely. Public policies are not only shaped to suit finance capital, but also are embedded with their “taken for granted” assumptions. These assumptions include the promotion of free movement of capital across borders, the repealing of regulatory frameworks, and the overturning of oversight regimes. To make a point, we will run ahead of our narrative here. In the fall of 2008, the US Congress propped up the banking system. The $750 billion Troubled Asset Relief Program (TARP) bailout was exactly the “privilegedispensing” move by the state that Hilferding was writing about in 1910. Compare the political response to the banking crisis with the meager, parsimonious reaction to the problems of the automotive industry, or even of the housing crisis. Cars and housing are important, but not nearly as important as finance and banking. Paulson and Bernanke managed to frighten politicians into accepting the package by painting a scenario that the world was going to collapse if nothing was done. This may or may not be true. My argument is that this conclusion comes less from a fully formed economic analysis than from the contemporary ideology that fixates on banking and finance. The power of finance capitalism is such that its interests are now viewed by most in the US government as the only way to understand the world. Current policies and beliefs clearly reflect the interests of bankers and financiers and not the general welfare or common good. Indeed, the general welfare is recast from “what is good for General Motors is good for America,” the slogan of industrial capitalism, to the new mantra of finance capitalism, “what is good for Goldman Sachs is good for America.” And just as the centrality of car companies influenced policy in former years, so the financial sector dominates the body politic now. The Great Recession reveals the structural problem when one sector defines the national interest, shapes government policy, and has its values embedded in the everyday understanding not only of how the world works but also of how it should work. The financial sector sought to overturn the regulatory framework developed out of the experience of the Great Depression when a precipitous stock market collapse turned into a credit crisis, creating mass unemployment. In the Great Depression banks failed and households and businesses were unable to get loans. The experience of the Great Depression revealed the limits of the market’s ability to self-correct. In response, and to forestall a repeat, the Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC), as a guarantor of bank

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deposits, and separated banking activities from investment activities to stop banks from making risky investments with depositor’s money. The act gave banks some form of insurance but limited the risk of their investment choices. The act was the framework for the US financial industry for almost 50 years. It was based on a belief that markets needed to be regulated, especially financial markets. The regulatory system worked reasonably well. After the long postwar economic growth and then the experience of stagflation in the 1970s, the new economic ideology of neoliberalism came to the fore in the 1980s. It was an ideology vigorously promoted by the burgeoning financial sector. There was a positive feedback loop as deregulation allowed the financial institutions to get bigger and more powerful, which in turn enabled them to lobby for legislation that allowed them to grow even more. Not only were these institutions allowed to get bigger, but they were also allowed to undertake riskier investments with less supervision and regulation. The regulatory framework of the Glass-Steagall Act was overturned in a series of measures. In 1980 the Depository Institutions Deregulation and Control Act allowed banks to merge and abolished limits on interest rates that these institutions charged. Two years later the Garn-St. Germain Depository Institutions Act further deregulated financial institutions to allow banks to issue adjustable-rate mortgage loans. Incidentally the act was subtitled “an act to revitalize the housing industry by strengthening the financial stability of home mortgage lending intuitions and ensuring the availability of home mortgage loans.” The nod toward homeownership “legitimated” the enterprise. Who could possibly argue with ensuring loans for homeownership? The regulatory framework of the Glass-Steagall Act was finally repealed with the 1999 Gramm-Leach-Bailey Act that allowed banks to trade in mortgage-backed securities. Overturning the act allowed US financial institutions to remain competitive with securities firms and foreign banks, for greater diversification in investments, and for institutions with huge financial power the opportunity to be actively involved in riskier investments. The Glass-Steagall Act, initially introduced when financial collapse was a recent experience, was overturned by successive pieces of legislation that allowed financial institutions to become bigger and take on riskier investments. This sequential legislation was never portrayed as particularly risky: it was sold as a deregulation that allowed economies of scale, greater efficiencies, more customer choice, and since it supported homeownership, it

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must be alright. Deregulation was vigorously promoted because it allowed more money to be made, bigger profits to be generated, and compensation packages to burgeon and flourish. Those were the powerful, material interests at stake in pushing deregulation. But the push was so successful it became not so much a policy option promoted by powerful material interests, but as a tenet of faith bordering on religious devotion. Deregulation like homeownership became a sacred cow, worshipped rather than examined; its high priest was Alan Greenspan, chair of the Federal Reserve from 1987 to 2006, more an ideologue than an economist and more a political hack than a guru, the status afforded to him during most of his tenure. The two structural flaws of the financial collapse that initiated the Great Recession were the unblinking promotion of homeownership and the unthinking commitment to deregulation just as a new untested financial system was evolving. Deregulation was especially risky in the financial sector where new products untested for risk were only just emerging. Compare this with the industrial sector, where, with some changes in production techniques the same sorts of things, be it widgets or cars, continue to be made. Deregulation of the manufacturing sector was occurring in a mature sector whose basic structure had evolved over a century. In finance, in contrast, deregulation was touted just as new exotic products such as collateralized debt obligations and hedge funds were created and an interlinked global system only just coming into shape. Deregulation was introduced around the world just as new and unforeseen risks were increasing and institutional experience and knowledge was lacking. A new world of finance was in the process of creation just as regulations were torn down and oversight was abandoned. Events in the interconnected global financial system prefigured the financial collapse in the United States. For example, in February 1995 one of Britain’s oldest merchant banks, Barings, collapsed. The main reason was the losses that amounted to almost $1.4 billion incurred by a 28-yearold trader, Nick Leeson, who was manager of Barings’s future trading unit in Singapore. He lost the money in speculative trading on the Japanese stock market. Just months before the 2008 financial crisis hit the United States, there was another ominous and cautionary tale from Paris. The actions of a young futures trader, Jerome Kerviel, cost the French bank Societe General $7.14 billion, about a fifth of its total capitalization. Both incidents were designated as problems of rogue traders whereas in fact

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they reflected, embodied, and predicted systemic failings of the entire system. A system was coming into being faster than people’s ability to understand it, let alone predict it. It is the height of folly to call for an unthinking commitment to deregulation while the new, unknown system of global financing was evolving. This is not to argue for a permanent, heavily regulated system, but it is to suggest caution, restraint, and some oversight as a new global financial system—with all of its risks yet to be discovered—develops. The shift from a highly regulated banking and finance sector to a much more deregulated one reinforces the rise of finance capitalism to a position of dominance. Deregulation allows the sector to grow and expand, and this expansion creates a powerful force to keep pushing for more deregulation. During the expansion, checks and balances were withdrawn, overturned, or ignored. Financial institutions were allowed to take on greater amounts of risk because returns were higher. Prudence and probity became old-fashioned concepts in a world of high returns and bloated compensation packages. The Secondary Mortgage Market The Secondary Mortgage Market Enhancement Act of 1984 allowed state-chartered financial institutions such as pension funds and insurance companies to purchase mortgages. The act opened up a secondary mortgage market, in which mortgages could be bought and sold. On the upside, a secondary mortgage meant increased liquidity as institutions could sell on the mortgages they had issued and receive new injections of capital. If a company provides mortgages to house buyers, then the money is locked up for perhaps 30 years. But if the company can sell the mortgage to another company, it gets money that it can use to allocate even more mortgages. On the downside a secondary mortgage market breaks the direct links between the borrower and the lender and, as we shall see, the downsides were considerable. The secondary mortgage market allows the securitization of mortgages. Mortgages are now not just a loan from a lender to a borrower, but they become a commodity that the lender can sell as a security that can be bought and sold again and again. The secondary mortgage market is like a chain that connects various interests. At one end are house buyers who obtain mortgages from a mortgage-lending institution. In turn these institutions can either keep the mortgages on their books or sell them to

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a bank or another financial institution who can then package them as a Collaterized Debt Obligation (CDO) that they sell to investors at the other end. In theory the system creates greater liquidity. Homebuyers get access to mortgage funds while investors get access to secure investment opportunities. In the middle of them, the financial institutions make money connecting the two ends of the chain together. It seems a rational system worked out by smart people. What went wrong with this system? Because it was a long chain that passed on the risk, the emphasis was on quantity rather than risk. Under the old regulated system, if you are a financial institution that keeps mortgages on your books, you are very careful in lending: you are directly responsible for the risk of default. In this closed-loop system, mortgage applicants are screened carefully for their creditworthiness and their ability to pay. But in the long, open chain of a deregulated, highly securitized system, the institutions that issue the mortgage quickly sell it on; their aim is to generate income from originating and selling mortgages. Risk is passed on to someone else. The securitization of mortgages is a complicated process. Buying and selling individual mortgages is time-consuming, and it is much more efficient to combine many mortgages. When pooled together and sold, this is known as a mortgage-backed security, a specific form of a CDO, which pays investors from the proceeds of the underlying assets. The mortgage payments of the initial borrowers eventually make their way along the chain of connection through the financial institutions to the investors who purchased the mortgages all bundled up as CDOs. These CDOs were complicated instruments that needed new pricing models in order to work out rates of return and risk factors. Complex quantitative models were constructed to price these securities, but the seeming solidity of the mathematical models gave investors a false sense of security about their robustness. The very complexity of the models meant that few people had any idea of the real underlying risks. Complex mathematical models can obfuscate as much as they reveal: they can hide as much as they illuminate. Only a few know much about their internal dynamics. They were mathematical and complicated, produced by clever analysts and touted by smart people, and so they must be ok. No one reads the model specifications; they focus on the bottom-line rate of return. Fees for services made all the actors focus on turnover rather than underlying sustainability. In order to cope with the risk of mortgage default, the mortgages were partitioned up. Low-risk mortgages were bundled up for investors who

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wanted steady rates of return and little risk. Bundles of higher-risk mortgages, in contrast, gave higher returns because of the higher possibility of default. The CDOs were, in theory, divided up into tranches of differing risk and return. In order to satisfy investors, the tranches were supposedly examined by credit rating agencies to provide investors with an unbiased estimate of the underlying risk of the investment. As we will soon see, this was one of the weak links in the chain. Mortgages are graded for risk. The lowest risk mortgages are those where the house buyer makes a large deposit, has a good credit history, and there is documentation to prove they can afford the repayments. These are prime mortgages. They dominated much of the mortgage market for years. But in the 1990s, subprime loans became more important. These are loans given to homebuyers who often, but not always, have a poor credit history and lower incomes. Subprime mortgages have a higher risk of default. Midway between prime and subprime are AltA loans with little or no documentation. Subprime and Alt-A loans are charged at a higher interest rate because of the greater risk of default. Subprime lending was aided by two pieces of legislation. The 1980 Depository Institutions Deregulation and Monetary Control Act disbanded state usury laws. Subprime lenders could now charge more to compensate for the increased risk. In the increasingly scuzzy world of mortgage lending, however, mortgage originators were keen to allocate subprime loans even when households were eligible for prime loans because they generated higher fees. In fact, studies suggest that almost 60 percent of households who were given subprime mortgages were eligible for prime mortgages. Many banks and financial institutions specifically targeted low income and minority neighborhoods and sold them subprime loans even when they were eligible for prime loans. African American households were almost four times more likely to get subprime loans even when eligible for a prime loan.6 In Baltimore, for example, banks such as Wells Fargo specifically targeted low-income black neighborhoods for subprime loans.7 The same act also erased the distinction between mortgages and home equity loans. The bulk of subprime lending, almost 80 percent, was not for purchasing new homes but for home equity loans, through which borrowers borrow a loan based on the asset value of their house. In 1992 the Alternative Mortgage Transaction Parity Act allowed newer forms of mortgages to be sold. Rather than just the standard loans with a large down payment and a 30-year repayment, mortgage originators could now sell adjustable-rate mortgages with

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teaser low rates that ballooned out after three to five years and interestonly mortgages where, for a fixed number of years, borrowers only paid the interest rather than the interest and principal. In the short term it allowed lower-income households to afford homeownership. The legislation allowed riskier mortgages to become a standard part of the mortgage business. In effect, the deregulation of the financial system allowed mortgage companies to originate more subprime and nonstandard loans and sell them in the secondary mortgage market. From 1996 a housing bubble began to form in the United States. House prices doubled between 1996 and 2007 when the average sales price of new homes increased from approximately $150,000 to $300,000. Cheap interest rates fueled the bubble, and the housing market was hot. Mortgage originators churned new mortgages including subprime mortgages, which increased from around 10 percent in 1996 to 23.5 percent in 2006. At the peak in May 2007 there were subprime mortgages worth $840 billion. At the originating end of the chain, the emphasis was on generating new mortgages and passing them on through the chain. In the bubble-like atmosphere with house prices continually increasing, lending standards slipped to almost criminal levels. Loan-originating companies made their money from generating new mortgages, not assessing the inherent risks in encumbering people with mortgage debt they could barely afford. Loan originators were paid on turnover. They also made more by arranging more expensive subprime loans for people even when they were eligible for prime mortgages. The mortgage originators became lax, concerned with quantity and not quality and provided mortgages to people without income verification or a down payment. No income verification loans became ever more common. Some were referred to as NINJA loans: no income, no job, or assets. Households were fitted up with subprime loans. What was the risk after all? Housing prices would always increase, so households could always remortgage and realize the increased value of their house. And even if there was a risk, it was passed to another link in the chain and that became someone else’s problem. All the agents were making money drumming up new mortgages or home equity loans, packaging them as CDOs, and selling them to investors in the United States and around the world. One link in the chain failed spectacularly. The three major rating agencies—Fitch, Moody’s, and Standard & Poor—were supposed to carefully assess the risks of the mortgage-backed securities. In their hunger for fees,

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the rating agencies turned a blind eye. The rating agencies were paid by the very institutions selling the CDOs. They developed too cozy a relationship with the institutions whose products they were grading; they became more concerned with maintaining this close relationship and the resultant high fees and lavish compensation than with correctly identifying risk. As the volume of mortgages increased, credit rating became more a guesstimate, always in the favor of downplaying the inherent risk than based on a careful assessment. NINJA loans made their way through the chain of securitization from loan originators to investors through lax credit raters. The credit agencies wanted the business and they consistently underestimated the risk involved so that investors were not scared away. Thousands of CDOs were given the highest rating of AAA (TripleA), the same category then as the US government. From 2000 to 2007 Moody’s alone rated 35,000 mortgage-backed securities as Triple-A. In 2006 they awarded 30 triple-A ratings each and every day to these securities. Subsequently, 83 percent of these triple-A rated securities had to be downgraded.8 The pooling of mortgages worked to hide the risk of individual mortgages within the pool, as the top-rated mortgages were used as the basis for the entire CDO credit rating. The credit rating agencies were guilty of dereliction of their basic duties. They rated risky securities as safe investments, their negligence a product of their desire for increased business and higher fees. Failure to perform basic duties meant that toxic assets were passed on through the chain.

Financial Collapse There were early signs that something was wrong. It was apparent first at the originating end of the chain. Predatory lending by subprime mortgage companies appeared in the late 1990s. Subprime lenders were particularly active in low-income minority communities. People denied access to traditional forms of housing finance were often encouraged to take out loans that they could neither afford nor able to repay. When they soon fell into arrears the mortgage company repossessed the property and flipped the house again. The city of Baltimore was a hot zone for flipping with 5000 foreclosures in 1999 alone and a default rate of 18 percent over the period 1996–2000. The FHA average was 6.4 percent. House flipping was a common practice in inner-city neighborhoods with specialist firms such as Capital City Mortgage Company foreclosing on

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one in every three mortgages it allocated. Citigroup was also involved in the inner-city housing market of Baltimore. Attempts by state legislators to reign in predatory lending were thwarted by federal regulators. The Office of the Comptroller of Currency, responsible for regulating banks, preempted states from regulating the consumer lending of banks, the Office of Thrift Supervision overrode state mortgage regulations, and the chair of the Federal Reserve, Alan Greenspan, consistently refused to consider the consequence of predatory lending, subprime loans, or the need to burst the housing bubble. Keep deregulating was his mantra. He had one message and one message only: the market knew best. The message was continually promulgated as the sole basis and guiding principle of government policy. The regulatory capture of government by the financial institutions allowed the secondary mortgage market with all its emerging criminality and chicanery to flourish, the housing bubble to expand, and subprime lending to dominate the system. The lax ethics of predatory lending and the allocation of subprime and exotic loans became standard as the housing bubble expanded in the early 2000s. Documentation was neither required nor requested. Liar loans and NINJA loans became common. More exotic loans were allocated; by the mid-2000s one in four mortgages was an interest-only mortgage. The chain now linked shady origination, opaque pooling, negligent credit rating, and lousy risk assessment into products distributed throughout the entire financial system. The process was only sustainable as long as house prices continued to rise. The risks were hidden as long as the exchange value of housing was appreciating. As housing prices continued to increase, the market was feverish in originating mortgages and packaging them as securities. The subprime mortgages were still being used to purchase or refinance a rising asset value. The inflexion point was 2004 when the rate of homeownership reached its highest level of just over 69 percent; the average mortgage rate was around 6 percent (although subprime rates were significantly higher); and housing affordability indices revealed that relatively speaking housing was more affordable than at any time since 1981. From 2000 to 2005 homeowners gained around $3 trillion in increased home equity wealth. It was a seemingly endless rising tide of wealth. The bubble then burst. The growth in house prices was unsustainable as housing became more expensive in relation to income. Interest rates were raised 17 times between 2004 and 2006. Even with creative mortgages, the rising cost made housing less affordable. Mortgage payments

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as a proportion of income rocketed up from 20 percent in 2002 to over 30 percent by 2006. Vast tracts of new housing were coming onto the market just as demand began to falter. In 2005 there were 1.7 million new single-family housing starts, 50 percent more than the annual average for the previous 20 years. By 2006 it was estimated that the housing overhang—the excess of supply over demand or the units that could not be sold with current demand levels—was between 1.1 million to 1.4 million units. Housing inventory was increasing just as prices began to slip, and mortgages were more expensive. Supply outstripped demand and prices fell. The riskier subprime mortgages were especially vulnerable to rising mortgage rates and declining house prices. In 2006 the sound of bursting bubbles could be heard across the nation’s various housing markets. Rather than regional depreciation, common to previous housing bubbles, this was a national phenomenon. From the older suburbs of Philadelphia to the new tract homes in Las Vegas and across the Sunbelt from Florida through Arizona to California, prices stalled, faltered, then fell. People defaulted on their mortgages. The default rate was particularly high in the subprime category, where 45 percent of 6.7 million subprime loans eventually went into 30-day delinquency or foreclosure. Thirty percent of the 1.1 million adjustablerate mortgages and 23 percent of the 2.4 million Alt-A loans also became delinquent or were foreclosed. For the standard prime mortgages, the figure was only 2.5 percent. In the summer of 2006, the problem was first visible at the originating end of the chain. The subprime industry was immediately in difficulty as borrowers defaulted. New Century Financial, which specialized in subprime mortgages, saw very early defaults on mortgages. Within months, sometimes even weeks, of getting their mortgages and moving into their new homes, borrowers were defaulting. In many cases the mortgage payments did not cover local taxes or insurance and when faced with their first property tax bill, those with mortgage payments far in excess of their ability to pay realized that they had an unaffordable house. Some just walked away from the home. With no down payment and few payments made, the walk was made that much easier. Mortgage companies now had toxic assets that they could not pass so easily up the chain. The declining volume and indications of house price decline encouraged closer inspection of the portfolios. In the spring of 2007, 25 subprime lenders declared bankruptcy. Since 2006, 300 mortgage lenders have gone out of business.

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The toxic mortgages packaged as CDOs were still in the chain. The bursting of the housing bubble was about to become a financial crisis. The financial company Bear Stearns was heavily invested in mortgage-backed securities of subprime loans. When Cioffi and Tannin realized that the subprime market was “toast” in the spring of 2007, the company began its downward slide. Although the company initially survived the failure of the two hedge funds, its reputation was seriously damaged, and investors lost confidence. In the early fall of 2008, it ran out of money and was sold in a fire sale to JP Morgan, a deal brokered and encouraged by the Federal Reserve and the Treasury. Then it was the turn of Fannie Mae and Freddie Mac to run out of money. They were responsible for almost half of the nation’s $12 trillion outstanding mortgage debt. Their share value plummeted 80 percent from May to September 2008. They were taken over by the government on September 8, 2008. With the collapse of the subprime market, the mortgage-backed securities were rendered worthless. The fourth-largest investment bank, Lehman Brothers, had significant amounts of these toxic assets on their books because they were aggressively involved in the mortgage market. In 2003 and 2004 they acquired five mortgage lenders, including one that specialized just in Alt-A loans. Initially, it seemed a smart move, as returns were far better than from the other two sectors of the bank’s business, investment banking, and asset management. The mortgage market, when the housing market was booming, was a cash cow, but as housing prices nosedived and foreclosures increased, the assets were a drag on profitability, and they no longer produced high returns; they created uncertainty about their true value. In February 2007 the company was trading at $86 a share with a total capitalization of almost $60 billion. The problem was that it had $85 billion in mortgage-backed securities on its books whose value was unknown and perhaps totally worthless. Through 2008 Lehman was under pressure and the shares of the company fell as investors fled. The share price plummeted from $66 a share to only $4 a share. The company could neither attract private investment nor credit nor secure a federal bailout. On Monday, September 15, 2008, the company filed for bankruptcy protection. The housing crisis was now a full-blown crisis of the entire financial system. Panic swept the market. There were mixed signals from the Federal Reserve and the Treasury: they lubricated the sale of Bear Stearns to JP Morgan, and they intervened to prop up Fannie Mae and Freddie Mac. Yet they let Lehman fail. The secretary of the Treasury spoke out against

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moral hazard, the government underwriting of risky behaviors that in turn promotes risky behavior, but the commitment to resisting moral hazard evaporated when it quickly became apparent that one the world’s largest insurance companies, AIG, was also in difficulty. AIG played a huge and pivotal role in the global financial system. It was heavily involved in insuring against subprime mortgages defaulting through the mechanism of credit default swaps. Swaps are deals in which a financial institution such as a bank insures against the loss of an asset, in this case the mortgage default. The bank pays an insurance premium, and in return AIG promises to pay 2 percent of the face value of the asset in the event of a default. It is a good deal when the housing market is booming: foreclosure rates are low and mortgage borrowers, even if they get into difficulty paying their mortgage with their current salary, can always get access to more cash with home equity loans that are easy to secure because the exchange value of the house is rising. The risk of foreclosure is slight, so it makes good business sense for AIG as they receive hefty insurance premiums with little risk. For the banks the swaps had an extra benefit: they allowed them to claim triple-A rating because, in the murky, unregulated world of credit swaps, the investment was classified according to the credit rating of AIG and not the toxic mortgages. With this triple-A rating the banks did not have to keep as much capital in reserve and so they used more of it to make even more investments in CDOs. And in the unregulated market, AIG could issue these swaps without collateral. It was a house of cards that began to tumble when mortgage foreclosures increased. AIG was now on the hook for all the failed securities. Even paying only 2 percent meant huge payments were coming due, all at the same time. European banks as well as US institutions were heavily involved in credit default swaps with AIG. The entire global financial system was now affected. As the CDOs were failing, the payment for default swaps was coming due. In the final quarter of 2007, AIG declared a loss of $11 billion. By 2008 it was going bankrupt. An important lynchpin of the global financial system was collapsing under the weight of mounting debts that it did not have the money to repay. All the financial institutions with swaps with AIG—and that was most of them—now had huge losses that they could not recoup. AIG, with offices in New York, London, Paris, and Hong Kong, was considered too big and too important to fail. Its demise could have pulled down every major bank in the United States and abroad.

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A fundamental element of financial institutions is trust—the trust that their stated assets are real. When there is doubt in the underlying value of an institution or its ability to pay its debts, trust is lost. When it happens to all the major institutions at the same time, the system as a whole is in danger of collapsing. The financial system experienced a liquidity crisis because institutions did not trust each other, and so interbank lending stalled. With no one trusting anyone else, credit lines to households and companies were jeopardized. On September 16, the Federal Reserve took over effective control of AIG and created an $85 billion line of credit that was eventually extended to $182 billion in order to calm the markets. The Treasury and Federal Reserve then worked out a plan to signal their commitment to solving the liquidity problem. On September 19, Treasury secretary Henry Paulson, who had worked all those years at Goldman Sachs actively and successfully pushing for more deregulation of the system, now put forward a plan to use $700 billion of government money to rescue a system that was now in free fall. The plan was given the name Troubled Asset Relief Program (TARP) and was initially sold to Congress as a way to buy the toxic assets of all those CDOs composed of defaulting mortgages. The amount was calculated by assuming a 5 percent default rate of the nation’s $14 trillion worth of mortgages. The plan was formally presented as the Emergency Economic Stabilization Act. It was initially rejected by the House. A strong populist sentiment did not want to see government money used to bailout incompetent and greedy bankers. The legislation was then sent to the Senate, always more immunized from immediate populist sentiment by senators’ longer tenure. It was passed by the Senate on October 1 and passed by the House on October 3, 2008. Armed with this new authority, the Treasury and Federal Reserve then dramatically changed the just recently agreed policy from purchasing troubled assets to injecting liquidity into the system by essentially giving money to the nations’ banks. Eventually, over $245 billion was “invested” in US banks in return for stock. The Fed also lent $1.2 trillion of taxpayer money between 2008 and 2010 to major financial institutions to ensure liquidity and guaranteed access to a further $13 trillion. The government’s involvement did dispel the liquidity crisis. Banks did start lending to each other and there was a more orderly unraveling of the toxic assets. The banking system as a whole was saved. But at what price? When the public bailout was compared to the private compensation packages of the bankers, a moral economy was invoked. The historian

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E. P. Thompson first raised the issue of the moral economy in a paper published in 1971.9 He was referring to the food riots, which occurred every ten years or so in late eighteenth-century England. He demolished the old belief that the riots were spasms of hunger, suggesting instead that they represented a highly complex form of direct popular opinion. They were about establishing the moral price of food rather than the going market rate. A moral economy was invoked when the public was made aware of the depth of the crisis and the enormous level of compensation, with the public outcry reaching a feverish pitch at the announcement of $165 million retention payments to workers in the bailed out insurance giant AIG in March 2009. The company had followed some very risky practices, jeopardized the entire US financial system, lost a great deal of money, and was eventually bailed out by the federal authorities. On the surface, the retention payments were small compared to the $182 billion that the company received. And many of the people responsible for the risky behavior had long left the company. But the popular sentiment was not a calibrated public policy response; it was a restatement of a moral economy in the face of a market economy out of step with popular concerns. There is a sense that the financial service sector at the top level is over-rewarded. The system of bonuses and retention packages originated when both profits and risks were borne by partners in trading companies. Now, in large public companies, the upper executives overpay themselves, a practice authorized and condoned by compliant, collusive boards, while the risks and costs are socialized and paid by the shareholders or eventually the government and the public. The former CEO of Countrywide, a mortgage company that specialized in risky subprime mortgages, made out very well in the last six months of 2007. Angelo Mozilo was paid almost $2 million in salary, given $20 million in stock, and sold $121 million in stock. The company meanwhile lost $1.6 billion while the share price fell 80 percent. Bad luck for the shareholders, but no problem for Mozilo.10 It is against the background of privatized benefits and the public nature of the costs that people responded to the AIG bonuses. What is surprising is how quickly the political system responded to people’s anger: within a week of the bonuses becoming public, the House introduced a measure to tax the benefits up to 90 percent. Such an intimate and close connection between the public mood and federal response is rare. The founders were distrustful of a full and functioning government by all the people.

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The Congress and the other two branches, the executive and the judiciary (an oligarchy of lifetime appointees whose ideology always seems half a century behind the general public), limit and blunt the expression of the popular will into policies and politics. Policies in Washington, D C. are shaped by interest groups who hone regulations to meet their needs. The political system listens attentively to the organized power of money. Politicians desperately need money to stay competitive, win races, and stay in power. Those with the most money have the best access: they have the power to influence and advise. Ordinary people exercise political choice at elections, but those with money exercise real political power. The proposed legislation was not well thought out, but then what US federal policies are? It was a raw expression of a true democracy. It was the moral economy of the crowd armed with blogs and emails rather than pitchforks and street demonstrations, reaffirming values of fairness and community over greed and self, the moral economy expressed against an amoral economy. Despite the temporary public outrage at the time, the centrality of the financial system remains. In the heart of the crisis the Fed allowed investment banks such as Goldman Sachs to become commercial banks and thus granted them access to cheap funds from the Treasury. The crisis promoted increased concentration. A smaller number of larger institutions now play a huge role in the life of the United States. By the end of 2012 the holding companies of six largest banks had assets between $819 billion and $2.3 trillion valued at 63 percent of GDP; it was only 17 percent of GDP in 1995.11 The power of the financial system also was built into the way the crisis was perceived and how it was solved. The liquidity of the banks, not the problems of households losing their homes, was considered the main issue. It was treated as a financial crisis, not as a housing crisis. Little was done to get mortgages modified or to keep people in their homes. As households lost their homes and neighborhoods were devastated by the rising foreclosure rate, the official response was to give money to the banks with few if any regulations. The capital injection of $245 billion TARP funds was provided with few strings attached or stipulations. Wells Fargo, which had targeted low-income neighborhoods for shady mortgage practices, received $25 billion in the bailout. The banks could use the money to buy other firms. The same day that PNC Financial Service received $7.7 billion in TARP funds, it bought National City Corp for $5.58 billion.

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While foolish bankers were bailed out, homeowners who had made poor decisions were given little help by the government. The result was that as the banking sector returned to financial health, the housing market deteriorated. By 2011, 4 million mortgages were delinquent, a further one million were in the process of foreclosure, and half a million properties were now owned by the banks. To add insult to injury, many financial institutions used shoddy and illegal techniques to get people out of their houses. The centrality of financial interests is obvious in how the crisis was handled and the ability of the sector to restrict subsequent regulation. The legislation created in the immediate aftermath of the crisis, the DoddFrank Wall Street Reform and Consumer Protection Act of 2010, was weak and will be watered down still further in its implementation. It does not deal with the basic issue that the financial companies are now too big to fail. In theory, the legislation proposes rules so that regulators can control and unwind large institutions, but can regulators reasonably expect to unwind something as big as Citigroup that has 260,000 employees in 160 countries and close to $2 trillion in assets? Or will any risky behaviors by Citigroup eventually be subsidized by the government because it is just too big and too important an institution to fail? The concentration of financial power puts us all on the hook if the very largest financial institution begins to fail. And that leads to an implicit assumption that no matter what the problem is the government will always be a backstop, bailing them out no matter how stupid or risky their decisions may be. Provided with endless access to public dollars, what is the cost of pursuing the most lucrative of risky investments? Economists at the Bank of England describe the present arrangement as a doom loop as the very largest institutions, because they are assured of being bailed out of the negative consequences of taking in risk, are encouraged to take on even more risk.12 What is to stop further risky behaviors by large politically connected financial institutions when the gains are always privatized while the costs are invariably socialized?

Summary Remarks The reasons behind the financial collapse of 2008 comprise a complicated story with many twists and turns, heroes and villains, containing traditional elements such as homeownership and mortgages and new exotic forms such as collateralized debt obligations and credit default swap. But

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at its heart was an unblinking commitment to homeownership combined with a deregulated financial system that has captured the federal government. The result was that almost 8 million families lost their homes between 2007 and 2014. Homeownership for too long has been the sacred cow of government policy. A mortgage is a huge debt, often forgotten in the promotion of the American Dream; it is a massive debt that weighs heavily on household financing requiring steady financing and continual repayment and an exchange value subject to the vagaries of the market. These lessons are learned during downturns but forgotten in the upturns. Perhaps, for a fresh perspective, we need to turn to commentators writing before the obsession with homeownership took such complete hold. In 1932 the editors of Fortune noted that two-thirds of the population probably could not afford homeownership. Their assumption was that no households should buy a house more than two times their annual income. Compared to the freewheeling days of the early 2000s the limit seems quaint, but it was based on sound financial sense. We have moved away from this more sensible limit because the exchange value of housing lures more people into more expensive house purchases. In 1945 John P. Dean, in his book Homeownership: Is It Sound? identified a nexus of interests including builders, mortgage lenders, household magazines, and chambers of commerce that relentlessly push the agenda of homeownership. Over the years the nexus has only got bigger and more powerful. As we continue to pick through the debris caused by the subprime lending fiasco, it is pertinent to ask how we got into this mess. Dishonest and misleading lending practices, unreliable risk assessment, sheer greed, and other dubious financial practices all played their part, but at the heart of the matter is the shibboleth that homeownership is the only housing policy worth pursuing. The obsession with homeownership makes the alternatives very unattractive. Public housing disappeared for all but the very poor, and private renters receive no tax breaks. An aggressive and self-serving lobby of house builders, realtors, and financiers has exaggerated the gains. Most gains go to those with higher incomes. For people on more modest incomes, homeownership can be a very mixed blessing. Their finances are severely stretched by mortgage repayments as well as maintenance and repair costs that tend to be a higher proportion of total value for older lower-priced homes. And prices are more likely to fall or stagnate in lower-income areas. The devaluation of many inner-city neighborhoods and suburbs built between 1945 and 1980 is evident.13

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In 1950 homeownership was at 55 percent; then it rose steadily to around 63 percent from the 1960s to mid1990s. The rate was then pushed up to almost 69 percent by mid-2007. Encouraging homeownership beyond around 60 percent, as successive administrations have done, has pushed more households into a precarious financial position. If we have learned anything from the history of government, it is that one policy size does not fit all. Yet that is exactly our housing policy. We need to embrace a diversity of housing possibilities. Let us level the playing field so that homeowners do not receive such disproportionate benefits by perhaps reducing and even eliminating the numerous tax benefits to owner-occupiers. Although politically difficult to accomplish in property-owning democracies, it is still possible. The UK abolished tax relief on mortgage interest payments in April 2000. Public housing is vanishing, but we can surely think of alternative forms of housing. There are a rich variety of housing tenure types such as social housing, cooperative housing, and others that can provide people with decent accommodation and much less financial risk. It is time that we critically evaluate the costs as well as the touted benefits of promoting homeownership. It is a costly, regressive system. Over the long haul, the windfall gains are not so dramatic as advertised. Middleand lower-income households are financially stretched by a system geared to benefit the wealthy. For middle-income America, homeownership is the preferred choice because there are no decent alternatives. The singleminded pursuit of homeownership is an assumption taken for granted and shared by both left and right. This sacred cow should be the biggest casualty of the financial crisis. Then there is the financial system that simply has gotten too big and too dangerous. The financial system is now a tight core of concentrated economic and political power that dominates federal policy. Excessive risk, such as the subprime fiasco, is underwritten by government bailouts. While individual firms such as Lehman Brothers may fail, the system as a whole is supported. The large and increasing size of the institutions makes the system vulnerable to the moral hazards of too big to fail. In the shorter term the solution lies in restricting the size of financial institutions, forcing greater capital requirements so that less capital is tied to risky investments, and making boards and senior management personally responsible for the risks they take. While no senior executives were penalized, there is some element of institutional accountability in the wake of the disasters. In 2010 Goldman

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Sachs paid $500 million to settle Securities and Exchange Commission (SEC) claims that it did not reveal the underlying risk of mortgagebacked securities. In 2012 JP Morgan Chase promised to buy back $3 billion worth of shares linked to shady mortgages. Also, in 2012 the Justice Department filed a civil lawsuit against Bank of America for $1 billion in losses associated with shoddy lending practices and then selling the mortgages onto Fannie Mae and Freddie Mac. The same year Wells Fargo was hit with a civil lawsuit for passing along shady mortgages. The FHA also filed a $196 billion lawsuit against 17 banks and 130 executives that the institutions did not perform due diligence on the mortgages that they sold as securities to Fannie Mae and Freddie Mac. Senior executives of Fannie and Freddie Mac in the run-up to the crisis were also charged with falsifying their agency’s exposure to subprime mortgages. These suits notwithstanding, financial elites do well in booms and are subsidized in slumps as they privatize the gains and subsidize the losses. Without strong regulation the system becomes unstable because with each economic expansion the financial institutions tend to accumulate riskier portfolios since that is how the largest profits are made.14 The powerful financial institutions captured the federal government in two ways. First, there was the regulatory capture in which the agencies meant to protect the public from financial misdeeds did little preceding the crisis. The government deregulated the banking system and financial institutions and encouraged all forms of high-interest exotic mortgages. The mortgage originating companies merrily allocated unsuitable mortgages confident that risk was passed along the chain. Because interest rates were so low, asset managers sought the higher yield from mortgagebacked securities without doing much serious research, and the credit agencies were criminally negligent in their awful assessment of the true risk of these securities. As all this was happening the SEC allowed unlimited leverage for the big institutions and the Office of the Comptroller of the Currency disallowed state regulations of mortgage credit and bank practices. It was an unholy mix of greed, regulatory capture, and incompetence with an extra layer of greed for good measure. Regulatory capture of financial watchdogs such as the SEC remains a problem, as a revolving door of private jobs after and before public appointments links the public agencies and the private financial institutions in a mutually beneficial traffic. The revolving door applies to politicians and senior officials all the way up to secretary of the Treasury.

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Second, the banks and financial institutions not only got bigger in the lead up to the crash, but they also achieved cognitive capture. Their interests are seen as tantamount to the national interest. This second and more pervasive form of capture of our government and its agencies by financial institutions remains long after the worst of the present financial crisis has passed.

The Aftermath The aftermath of the Great Recession continues to mark the United States and indeed the world. There were the specific responses. The 2010 Dodd-Frank Act, its full name is the Dodd-Frank Wall Street Reform and Consumer Protection Act, reorganized the regulatory system and established the Consumer Financial Protection Bureau (CFPB). Its overall aim was to end the too big to fail syndrome that caused US taxpayers to bail out negligent financial institutions and to protect consumers from predatory financial services such as credit cards, auto financing, banks and payday lenders. The Act restricted banks from making some risky investment decisions and required regular stress tests to check their resilience to economic downturns. The regulatory burden fell more heavily on the small banks, thus reinforcing the dominance of the large banks. The CFPB was established in 2011 as a way to protect US citizens from the predatory financial sector. However, as the economy grew and Republicans replaced Democrats as the ruling party, this regulatory regime was gutted. In 2018 the Trump administration exempted many banks for CFPB’s regulations. A stronger regulatory system introduced immediately after the Great Recession was weakened as the economy grew and Republicans with an ideology of neoliberalism gained political control. There were changes in the mortgage lending practices. There were no more NINJA loans, loans given to people, with no income and no jobs. Banks and financial institutions tightened up the rules for assessing the ability to pay back the loan. Subprime mortgages became less prevalent. The financial sector could no longer assemble portfolios of doubtful value and pass them onto unsuspecting investors. That game was over. Homeownership did not lose its appeal. If anything, as the economy regained its footing and then grew to almost full employment, homeownership regained its appeal as more people could make mortgage repayments, The homeownership rate reached as high as 69.2 percent in 2004, fell to 63.7 percent in 2016 and is now just above 65 percent.

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Homeownership continues to be promoted although there is some pull back. Under tax legislation passed in 2017, standard tax deductions were doubled making the tax relief from mortgage interest payments less relevant for taxpayers to reduce their taxable income. In 2018 16.4 percent of 154 million returns claimed the deduction. This fell to 14.3 percent in 2019. Of the 14.3 million households who claimed the mortgage interest deduction, over 10 million had earnings of more than $100,000. It remains a tax expenditure to the wealthy. The loan limit for deduction was also dropped from $1 million to $750,000 for married couples filing jointly. However, despite these tweaks, homeownership continues to be part of the American Dream. There were wider and deeper consequences of the Great Recession. On the one hand, there was a continuation of the financialization of US society.15 Banks and financial institutions continue to grow in size and dominance. Five of the nation’s largest banks hold almost half of all deposits in the United States and have total assets of close to $10 trillion. The financial sector with its bloated remunerations fuels the rising inequality. The minority of Americans who own substantial stick portfolios continue to grow richer while those who are dependent only on wages see their relative and often their absolute real incomes falling.16 The financialization of the economy is not just an economic trend: it is a cognitive capture of the traditional political imagination. As securing the financial market becomes a dominant theme of government policy, inequality increases as those without stock portfolios continue to struggle. An unrepentant neoliberalism continues to undergird a belief in unregulated market and distrust of the state. On the other hand, the Great Recession did mark a political rupture. The bailing out of the wealthy banks while ordinary homeowners were evicted, challenged and undermined popular belief in traditional politics and the fairness of the market. There was political resentment against a political class and a political system in the pocket of wealthy bankers. On the right, there was the rise of the Tea Party and a shift in Republican policies toward a more protectionist, nationalist agenda. Trump’s victory in 2016 has its origin in a populist response to the bailout as well as to a globalization that favored the better off. On the left there was a resuscitation of more radical agendas than those espoused by the centrist Clinton and Obama administrations. Occupy Wall Street was a movement that began in New York and spread across the United States and the world. The rallies expressed disgust at the system and seeded the move for

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radical alternatives. The movement for minimum wages in states and cities across the nation was just one example of this changing political climate. It also shifted the Democratic Party, although the leftward shift only takes the Democratic Party to mainstream European social democratic territory. The rise of Bernie Sanders and Elizabeth Warren and the demands for universal health coverage and a Green New Deal are just some of the delayed responses to the Great Recession. Different groups drew different lessons from The Great Recession. The financial sector waited for the revulsion and the criticism to stop, await a change in administration and regain its dominant position in the US economy and political culture. Then, there were the populist responses that transformed the Republican Party into a lickspittle supporter of President Trump and shifted the Democratic Party from the center to the left. These trends were also apparent around the capitalist west but the shift in the traditionally slow-moving US political system, with its two entrenched parties were more dramatic. The Great Recession led to polarization in US politics that, in itself, is a sign and source of stress.

Notes 1. Quoted in The Washington Post, June 12, 2008, A8. 2. Cited in Vale, L. J. (2007). The ideological origins of affordable homeownership efforts. In W. Rohe & H. L. Watson (Eds.), Chasing the American dream (pp. 15–40). Cornel University Press. Quote is from p. 25. 3. Many African Americans, even those who had fought in the war, had limited access to the program. The result was a marked restriction in the ability of African Americans to gain access to college or to get a mortgage. This has enduring consequences on their ability to benefit from the economic growth of the 1950s and 1960s. See Katznelson, I. (2005). When affirmative action was white: An untold story of racial inequality in twentieth century America. Norton. 4. In 2011 the mortgage interest deduction was $88.7 billion. 5. Johnson, S. (2009). The quiet coup. Atlantic Magazine. https://www. theatlantic.com/doc/200905/imf-advice. Accessed 9 Aug 2011. 6. Immergluck, D. (2011). The local wreckage of global capital: The subprime crisis, federal policy and high-foreclosure neighborhoods in the US. International Journal of Urban and Regional Research, 35, 130–146. See also Rugh, J. S., & Massey, D. S. (2010). Racial segregation and the American foreclosure crisis. American Sociological Review, 75, 629–651.

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7. Mui, Y. Q. (2012, June 13) Fighting a system that made her rich. The Washington Post, A1, A14. 8. Financial Crisis Inquiry Commission (2011) The Financial crisis inquiry report: Final report of the national commission on the causes of the financial and economic crisis in the United States. Financial Crisis Inquiry Commission. Cited on p. xxv. 9. Thompson, E. P. (1971). The moral economy of the English crowd in the eighteenth century. Past and Present, 50, 76–136. 10. Bruck, C. (2000, June 9). Angelo’s ashes: The man who became the face of the financial crisis. The New Yorker, 46–55. 11. Some of the concentration is a result of the response to the financial crisis itself. During the meltdown in confidence the government prompted and promoted mergers and acquisitions to shore up the system as a whole. In March 2008 J. P. Morgan bought Bear Stearns for $1.5 billion. In September 2008 Bank of America purchased Merrill Lynch for $50 billion and Wells Fargo purchased Wachovia for $15.2 billion. 12. Alessandri, P., & Haldane, A. G. (2009). Banking on the state. https:// www.bankofengland.co.uk/publications/speeches/2009/speech409.pdf. Accessed 15 Aug 2011. 13. Hanlon, B., Short, J. R., & Vicino, T. (2010). Cities and suburbs: New metropolitan realities in The US. Routledge. 14. Tabb, W. K. (2012). The restructuring of Capitalism in our time. Columbia University Press. 15. Ivanova, M. N. (2019). Inequality, financialization, and the US current account deficit. Industrial and Corporate Change, 28, 707–724. Christophers, B. (2018). Financialisation as monopoly profit: The case of US Banking. Antipode, 50, 864–890. 16. Arestis, P., Charles, A., & Fontana, G. (2013). Financialization, the great recession, and the stratification of the US labor market. Feminist Economics, 19, 152–180. Kalleberg, A. L., & Till M. (2017). The U.S. labor market during and after the Great Recession: Continuities and transformations. Russell Sage Foundation Journal of the Social Sciences, 3, 1–19.

Further Readings Aliber, R. Z., & Kindleberger, C. P. (2015) Manias, panics and crashes: A history of financial crises (7th ed.). Palgrave Macmillan. Bair, S. (2012). Bull by the horns: Fighting to save main street from Wall Street and Wall Street from itself. Free Press. Barofsky, N. (2012). Bailout: An inside account of how Washington abandoned Wall Street while rescuing Wall Street. Free Press.

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Bernstein, J., & Jesse Eisinger, J. (2011). The Wall Street money machine. Pro Publica. https://www.propublica.org/series/the-wall-street-money-mac hine. Accessed 11 Aug 2011. Blackeley, G. (2019). Stolen: How to save The world from financialization. Repeater. Connaughton, J. (2012). The payoff: Why Wall Street always wins. Prospecta. Financial Crisis Inquiry Commission. (2011). The financial crisis inquiry report: Final report of the national commission on the causes of the financial and economic crisis in the United States. Financial Crisis Inquiry Commission. Foroorhar, R. (2017). Makers and takers: How Wall Street destroyed Main Street. Crown Business. Geithner, T. F. (2014). Stress test: Reflections on financial crises. Crown. Johnson, S. (2010). 13 bankers: The Wall Street takeover and the next financial meltdown. Pantheon. Judis, J. J. (2016). The populist explosion: How the great recession transformed American and European politics. Columbia Global Reports. Lewis, M. (2010). The big short. W. W. Norton. Lowenstein, R. (2011). The end of Wall Street. Penguin. McLean, B., & Nocera, J. (2010). All the devils are here. Penguin. Posner, R. A. (2009). A failure of Capitalism. Harvard University Press. Shiller, R. J. (2016). Irrational exuberance (3rd ed.). Princeton University Press. Sorkin, A. R. (2011). Too big to fail. Penguin. Steger, M., & Roy, R. K. (2010). Neoliberalism: A very short introduction. Oxford University Press. Tabb. W. K. (2012). The restructuring of Capitalism in our time. Columbia University Press. Tooze, A. (2019). Crashed: How a decade of financial crisis changed the world. Penguin.

CHAPTER 5

The Gulf Oil Spill and the Costs of Regulatory Capture

In March 2008, in the city of New Orleans, the giant oil company BP purchased the right to drill for oil at the Macondo well in an area identified as Mississippi Canyon Block 252 in the Gulf of Mexico about 40 miles offshore. The oil company estimated that they could siphon up to 50 million barrels of oil from the well. It was an enticing prospect. The price of oil at the time of the auction was over $100 a barrel, so the well had the capacity to generate $5 billion in revenue. Factoring in a lease payment of $34 million and estimated production costs of $96 million, the well had the potential to become a great financial success for the company and its shareholders. As we all now know, the well did not achieve the hoped-for success. In fact, it was a disaster. There was an explosion that killed 11 people and caused a fire and a blowout that spewed millions of gallons of oil into the Gulf of Mexico, polluting land and sea, killing wildlife, and wrecking local economies. It was a disaster, but not the kind of disaster that is a complete surprise. Given the drift of events it was more of a disaster waiting to happen than a disaster from out of the blue. It was a predictable disaster. In this chapter I want to explore three structural factors that both led up to and were revealed by the explosion: tough oil, cost cutting corporations, and regulatory capture in an era of limited government. In explaining them, I will also discuss in more detail the sequence of events that led to the explosion in the Gulf on April 20, 2010. I will conclude with a discussion of © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8_5

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the ongoing lack of regulation of the energy industry and the continuing problems of regulatory capture in the United States.

Tough Oil The decision to make long-term investments in exploration and drilling, which involves millions and indeed billions of dollars, is not based on the gyrating world of short-term oil price changes. It can take 20 years from discovery of oil to successful exploitation. But long-term price changes do affect oil companies. Consider the long-term trend of crude oil prices. From 1881 to 1973 the price of oil, in real terms, remained flat. Oil prices were low and more importantly stable. Economic growth in the first three quarters of the twentieth century was quite literally lubricated by the steady supply of cheap, easily available oil. Adjusting for inflation, between 1881 and 1973 the price of a barrel of oil averaged under $20 in 2008 prices. That long period of stability was brought to an end on October 16, 1973. On that date the oil cartel Organization of Petroleum Exporting Countries (OPEC), dominated by Middle East oil producers such as Saudi Arabia, announced a decision to increase the price of oil by 70 percent to $5.11 a barrel (over $40 in 2008 terms). It was a punitive measure made to support Egypt in the Yom Kippur War with Israel. The price increase and associated oil embargo was meant to weaken United States support for Israel. It was politically unsuccessful but economically it was a stunning and world-changing success. Oil was central to the economies of richer countries and, since supply was limited and very largely controlled by the OPEC members, the oil-producing nations effectively increased the price of oil and hence their revenues. The result was dramatic. Between 1972 and 1977 as the current account balances of the world’s rich countries increased from $8 billion to only $9 billion, that of OPEC countries increased from $1.5 billion to $7 billion. The non-oil poor countries meanwhile increased their deficit from $5 billion to $36 billion. The oil price increase was one of the largest and quickest transfers of global wealth in the history of the world. The 1973 oil shock had a number of rippling consequences. The era of cheap fuel was now over, and energy had to be used more efficiently. Car companies, for example, had to change to more fuel-efficient models. Car companies in Japan, where oil prices were always much higher, already had experience in fuel efficiency. In the United States a generation of cheap oil meant that car companies had a few fuel-efficient models and were slow

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to realize the seismic shift in oil prices and associated consumer demand. The long decline of the Detroit car industry begins with the 1973 oil price shock. The price increase also prompted oil companies to look for alternative sources of oil to the oil of OPEC members and especially the Middle East OPEC members. The increase in the price of oil also meant that areas previously considered only marginally feasible now came into the possibility of profitability. The oil companies went long and deep in their search for oil.1 There was a seemingly insatiable demand for oil. In 1970, across the globe, around 45 million barrels of oil were consumed each and every day. By 2010 it was closer to 85 million. Even with energy efficiencies the raw demand just kept on growing. Rapid industrialization was based on oil. In 1970 China consumed only half a million barrels of oil a day. By 2010 it rose to a staggering 8.6 million barrels a day. The gap between demand and domestic supply entailed not only importing from overseas but also exploring tougher sources of oil, such as the expensive-to-extract oil in the Arctic to the tar sands of Alberta where oil extraction entails costly and environmentally damaging production. The oil is extracted through strip mining, which tears away the surface vegetation, releases heavy metals, and creates air pollution. There was also the fracking revolution that involved the exploitation of oil and natural gas locked up in shale deposits. Two of the biggest sites are the Marcellus field in the North East of the United States and the Bakken field in North Dakota The oil and gas locked up in these shale deposits are released through hydraulic fracturing—high-pressure application of water, sand, and chemicals that essentially crack the rocks and releases the oil and gas. This injection technique was developed more than fifty years ago but another innovation made it more powerful: the development of horizontal drilling in the 1990s that allowed drillers to go deep and then sideways to exploit widely dispersed reserves. The basic fracking technique is to drill down up to two miles and then drill horizontally as far as a mile. Fracking fluid, a mix of water and chemicals, is then pumped down at very high pressures to shatter rock formations to release the fossil fuels. The oil and natural are then pumped back to the surface along with the millions of gallons of flow back. By 2010 fracking had transformed the US energy sector. In 2000 there were 276,000 gas wells in the United States. The number had doubled by 2010. The impact of the fracking revolution was dramatic. In 2008 the United States produced

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7.8 million barrels of oil a day and ranked third in the world. By 2015 it was producing 13.7 million barrels of oil a day and had become the largest oil producer in the world. The cheap energy put pressure on other oil producers to reduce their prices. The price of a barrel of oil on the world market fell from $143 a barrel in 2008 to $30 in January 2016. There were many other factors at work including the cooling of China’s red-hot growth and consequent decline in global oil demand as well as oversupply, but the fracking revolution that provided cheaper oil and gas to the world’s single biggest consumer was a significant factor. The traditional oil extraction sector of drilling to tap underground oil and gas reservoirs shifted from an era of easy oil, one of large, shallow reserves that were easily exploitable to the age of tough oil where reserves are deeper, further offshore, and more expensive to exploit. The new fields are smaller, not as long-lasting; they peak fast then decline sharply so there is a continual search for new fields. Companies are continually at the furthest extent of their experience and technical capabilities as they drill deeper in ever more inaccessible places. The days of essentially putting short wells into huge shallow reserves are over as ever more oil production takes the form of drilling deeper and further offshore. The history of oil extraction in the Gulf of Mexico highlights the shift. Drilling first started in 1937, just off the Louisiana coast. The first well was located in 14 feet of water just off the shoreline. In 1993 approximately 12 percent of all oil produced was from deepwater wells, defined as 5000 feet or deeper. By 2009, 80 percent of oil came from deepwater wells and over a third of all new wells sunk were deepwater. The Deepwater Horizon was drilling in 5000 feet of water to a total depth of 18,000 feet. The era of tough oil means that a rig drilling for oil almost three miles down is located on a tiny exposed platform afloat in an area subject to hurricanes. Between 2006 and April 2010 the number of deepwater rigs grew by 43 percent. As they went further offshore and drilled deeper and deeper, oil companies were always at the ever-extending limits of their technical capabilities. Massive and potentially dangerous machinery has to be placed on small platforms far out into sea. At the deeper levels the oil is subject to up to 10,000 pounds of pressure per square inch, making the safe and steady release of the oil a difficult proposition. It is easy to fracture the surrounding geologic formations. Oil is a hazardous, highly flammable liquid. Pumping millions of gallons at high pressure through a small pipe more than 3 miles down is a high-risk activity. On the ocean floor where

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the wellheads are located, temperatures are low, and visibility is hazy. Adjustments have to be made using remotely guided machinery. Blowout preventers on the ocean floor are connected to the surface platforms by long pipelines exposed to strong undersea currents. It is a difficult and dangerous operation to drill so far down on a platform floating far out into sea. The very recent shift to deep offshore drilling, made urgent by the need for oil, meant that the technology was continually evolving and generating new risks and accidents. Between 1969 and 2009 there were 79 reported cases of loss of well control and seepage of oil and gas in the Gulf. Drilling for tough oil is a dangerous undertaking. Accidents are endemic in Gulf drilling. From 2001 to 2009 there were 1550 injuries, 60 deaths, and 948 fires and explosions in a workforce of only 35,000 people. An inherently dangerous industry was rendered even more dangerous by a culture of complacency in offshore oil drilling. There are equally dangerous conditions in European waters, but the fatality rate was only one quarter, when measured against hours worked, of what it was in the United States. There are substantial differences in safety even for the same oil companies. Oil extracting is more dangerous in US waters. And the main reason is the lax nature of government control.

Regulatory Capture in an Era of Deregulation As the drillers went further offshore into the deeper waters of the Gulf, changes were also occurring in the nature of government regulation. In 1982 the then interior secretary, James Watt, created the Minerals and Management Service (MMS). Its main job was to encourage drilling for oil and gas in US territory, collect royalties, and oversee the industry. The MMS was not a watchdog; it was a cheerleader for the industry. MMS became a transmission belt for industry-crafted legislation. The MMS adopted almost 80 standards straight from the American Petroleum Institute, an industry lobby group. Regulatory capture is the name given to the process whereby government agencies, established to regulate and control, become the effective tool of the very industry that the agency was meant to oversee.2 The MMS is almost a classic case study of regulatory capture because the term “capture” assumes an initial position of objectivity and neutrality. From its inception MMS was already captured as a willing partner to the

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oil companies. The MMS encouragement of noncompliance with regulation was consistent with the overall ideological shift toward a government minimally intrusive to the needs of industry. The oil industry and especially through its trade body, the American Petroleum Institute, effectively controlled the government agency. There was a revolving door. Many who worked for at the MMS then moved on to working for oil industry companies. There was a cozy relationship between the regulators and the regulated: too cozy, as the risks of deep-sea drilling in the Gulf continued to climb. At a time when regulation should have been more stringent because the risks were rising, it was becoming laxer, more complicit. Even the language was revealing as the terms “regulation” or “control” were rarely used. “Partnerships” and “encouragements” were the preferred words indicating the supine nature of the regulation. In 1993 an Interior Department report concerned with drilling was entitled Moving Beyond Conflict to Consensus. Directives from the federal government also ensured the passive and permissive nature of the agency. The relentless drive to reduce the federal bureaucracy in the Clinton administration created performance-based regulation. It marked a further shift toward regulation based on industry standards. This makes good sense when the industry standards do not lead to unsafe outcomes. As the agency lost personnel it was redirected more toward aiding the oil companies. In effect, the MMS was a federal embodiment of industry needs. In 2001 a presidential executive order opened deepwater leases that were previously off-limits. To encourage drilling, the oil industry was given relief from royalty payments. It was a perfect storm: on the one hand, a lax regulatory environment that rarely challenged the oil industry; on the other, more drilling taking place at the very edge of technical competence. As the drilling went further offshore and deeper, the margins of safety were reduced. Oversight was lax with minimal and sometimes nonexistent regulation at a time of increasingly risky behaviors. It was the same set of structural factors behind the financial crisis of 2008: regulatory agencies captured by the interests they were supposed to monitor and regulate and a complacent government unable and unwilling to limit or control increasingly risky behaviors by powerful and politically well-connected corporations. The national energy crunch at the time was making it easy for interests promoting offshore oil drilling to sound like patriots. Encouraging offshore drilling was presented as the route to energy security. A powerful

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oil industry was operating in a friendly environment that failed to question falling safety margins and rising risks. The main regulator was a small agency that had been co-opted. The 1995 Deep Water Royalty Relief Act exempted companies from royalty payment if they drilled in certain leases. The aim was to encourage deepwater drilling. As more drilling took place there were less personnel allocated to oversee it. In 2002 deepwater drillers were given even more royalty relief. The MMS informed oil companies in 2005 that they did not need emergency response plans for each new exploration plan. The oil companies did not have to provide details of a plan, indeed any plan in the event of a blowout. MMS officials in some circumstances also exempted companies from environmental impact statements. By 2005 the MMS granted around 650 such waivers to oil companies. There was also plain, old-fashioned corruption. A small agency was charged with promoting the interests of rich oil companies: it was a marriage of convenience that easily and quickly slid into outright corruption. A scandal erupted in 2006 when it was revealed that MMS personnel in Colorado accepted trips, ticket money, and sexual favors from the oil industry. I doubt anyone was really surprised, unlike the police inspector in Rick’s Café in Casablanca who was shocked- shocked I tell youto hear that gambling was taking place just as a waiter hands him his winnings. Given the context, it was a corruption waiting to happen. Another inquiry in 2010 found the same pattern of behaviors at another MMS office in Louisiana. One MMS inspector while negotiating for a job with an offshore drilling company also wrote four official evaluations of the company. They were, as you can well imagine, not damning indictments but glowing recommendations. The MMS was riddled with a culture of ethical failure. The MMS consistently undercounted the risks and dangers of deep-sea drilling and refused to address the rising number of spills and industrial accidents. The MMS was captured by an oil industry that was pushing further out into sea and was drilling deeper. On April 6, 2009, MMS granted BP permission to begin drilling in the Macondo well; it neither required nor asked for a detailed environmental analysis in the event of an oil spill.

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Cutting Costs and Taking Risks BP is one of the world’s largest companies. At the time of the blowout, it was the third-largest energy company and the fourth-largest company in the world. It produces around 4 million barrels of oil a day and has operations in over 80 countries. As a major oil company in the era of tough oil, BP has had its share of industrial accidents. In 1965 one of its oil rigs collapsed in the North Sea and 13 crew members were killed. In 2005 an explosion at a BP oil refinery in Texas killed 15 workers and injured 180. The accident was the direct result of cost cutting directives that reduced maintenance and undermined safety precautions. The Occupational Safety and Health Administration (OSHA) discovered hundreds of safety violations. In 2006 one of BP’s pipelines in Alaska leaked almost a quarter of million barrels of oil from pipes that were poorly maintained and rarely inspected. Drilling for oil and gas is a dangerous and risky industry, but BP’s safety record was noticeably low even by industry standards. In 2008 there was a gas leak and blowout at the gas field in the Caspian Sea. When it finally became public knowledge in 2009, BP blamed bad cement, a topic to which we will return later. The safety record of BP is tied to the career of John Browne. Long involved in the oil industry, Browne worked for BP from 1969 to 2006, gradually rising up the corporate hierarchy. By 1991 he was the managing director. He ushered in a series of cost cutting measures just as BP was becoming a global oil company in the time of tough oil. His goal was to make BP the world’s largest oil producer. One author describes his cost cutting as ruthless.3 Aggressive cost cutting does not necessarily mean that safety is compromised, but aggressive cost cutting at a time of tough oil raises the risk level. One BP engineer noted: The focus on controlling costs was acute at BP, to the point of becoming a distraction. They just go after it with ferocity that is mind numbing and terrifying. No one’s ever asked to cut corners or take a risk, but it often ends up like that.4

The poor safety record of the company failed to ignite much political heat. The steady stock price increase took care of shareholders’ main concern while the company’s pivotal position in Britain (BP is headquartered in London and British shareholders are a significant proportion of individual

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investors) assured little critical scrutiny in its home base. Browne was knighted in 1998 and made a peer in 2001. And in the United States, oil drilling was encouraged more than regulated. All companies have to manage costs. Spending on safety and maintenance is a cost that has to be contained if profitability is to be maintained. But ferocious cost cutting in an era of tough oil increases the risks of accidents, spills, blowouts, and ultimately disasters. While BP was concerned with occupational safety, making the workplace safe for the workers, their corporate culture was less tuned to process safety, which refers to the recurrence of risk. In the high-stake world of tough oil, intense competition, and punishing deadlines, risks were generated rather than reduced. Between 2000 and 2010 there were at least 16 fires on the Deepwater Horizon and in 2008 workers had to be evacuated from the platform when it began to sink.

The Blowout BP leased the 33,000-ton Deepwater Horizon from Transocean, a company that recently merged with another company, Global SanteFe, in 2007. And like all companies working on the tough oil frontier, it had problems. Safety standards had fallen in the years since the merger. Between 2000 and 2010 the US Coast Guard investigated 16 fires and other incidents on the rig. It is a measure of the risks and the state of affairs in deepwater drilling in the Gulf that this was not considered unusual. Deepwater Horizon replaced another rig that was damaged by a hurricane in November 2009. It arrived at the site in late January 2010 to drill for oil three miles down. Pipes stretched down through cold, dark seawater and then into a world of high pressures, uncertain geology, and combustibles fuels. The crew lowered a 400-ton blowout preventer (BOP) onto the wellhead in the seabed. The BOP is a series of valves to stop an uncontrollable flow of oil. There were a number of problems at the Macondo well. The drill was buffeted by high gas pressure, the BOP leaked fluid, and there were sudden gas releases. It was tough oil in the literal sense. The well was six weeks behind schedule and almost $60 million over budget with time running out and costs spiraling. By mid-April, the drill had reached the oil reserves and the well was being prepared for production. Cement was used to seal the well. Cementing is a tricky proposition and is one of the major factors in blowouts. Getting

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the right mix to seal the well is always fraught with danger. In the cementing process BP circulated only 350 barrels of mud rather than the 2760 barrels actually needed and pumped insufficient amounts of cement at too low a rate. Halliburton tested the cement blend in February. The results suggested an instability in the mix, but this precise message was never passed directly onto BP personnel at the site who had little experience in cement chemistry. The cementing, with what we now know as unstable cement, was completed on April 20. Then there was the testing of the well’s integrity to make sure there were no leaks. One test looked good and another did not. There was inexplicably high pressure in the drill pipe. At 8 p.m. on April 20 the BP site leaders declared the test a success. The first explosion occurred less than two hours later. Around 9.49 p.m. a blowout of hydrocarbons from the well caused an explosion and devastating fire. Eleven crew members were killed, and the rig was quickly consumed in flames. It burned for a day and then sank. The blowout protection measures failed miserably. The well continued to spew out toxic hydrocarbons. In total, almost 5 million barrels of oil flowed into the Gulf of Mexico. BP, with no clear plan or coherent strategy, was unable to cap the well until August 4, a full three and half months after the blowout first began to spew millions of gallons of oil into the warm Gulf waters.

Flaws Revealed There were many assessments of the disaster. The individual companies soon squabbled among themselves in assigning blame. Transocean blamed the cement. BP said that their employees as well as Transocean employees failed to correctly interpret the second test of the well. Halliburton claimed that BP used their cement incorrectly. BP sued Transocean, Halliburton, and the maker of the blowout preventer. The most sustained analysis of the disaster was a bipartisan National Commission set up by President Obama and co-chaired by Bob Graham and William Reilly. Their conclusion: the disaster could have been prevented. The immediate cause was systematic failure in risk management by BP, Halliburton, and Transocean. The report pointed out the dangers of deep-sea drilling as well as the lack of government oversight. They asked for fundamental reform in regulatory oversight in order to

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secure political autonomy, technical expertise, and a full consideration of environmental concerns.5 A full year after the spill, a report by the renamed Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) (notice the name change and the tenor of watchdog it implies compared to its old name of MMS) found that BP’s cost cutting contributed to the blowout. The report found that BP rewarded cost cutting rather than safety enhancement. The relentless pursuit of cost savings weakened safety. The good design did not have enough barriers to oil and gases spewing up the pipe. The operation should have been shut down well before the explosion. Transocean was also found to have a poor safety culture. Risk was not properly discounted for and no plan was devised in the event of a blowout.6 The oil spill was costly. The company set aside $32 billion to cover all the costs of the oil spill, knowing that large claims would ensue. By 2012, $6 billion was spent, including the immediate costs of the spill response, grants to states affected by the oil spill, and some early compensation. In papers filed in the federal court in New Orleans in September 2012, the US Justice Department accused BP of “gross negligence and willful misconduct.” The case went to trial in January 2013. In 2016, BP agreed to pay $20.8 billion for violation of environmental laws.7 There were particular reasons for the blowout in the Gulf on April 20, 2010. At the wellhead deep below the sea surface the cement was faulty, there was not enough mud, and the blowout protector was inadequate. Underlying these particular mistakes were systemic failures. The deeper structural factors at work were a reliance on oil, a belief in deregulation, and few controls on giant corporations involved in the very risky business of tough oil. Structural stresses arise from too great an appetite for oil, too much encouragement for cost cutting corporations that feed this addiction, and a lack of effective regulatory oversight. The disaster revealed some deep structural flaws. The first is the heavy reliance on oil. There is no more easy oil left. And if we continue to pursue tough oil, we will continue to experience accidents, mishaps, and disasters. It is a dangerous, risky business. The risks are exacerbated by the cultures of cost cutting corporations and lax oversight. The second flaw is that regulatory capture, always a potential problem, is heightened by a political culture that decries the regulatory role of government. Regulatory capture is endemic in a political context of an ideological commitment to small unobtrusive government.

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Since the Blowout The blowout on the Gulf of Mexico occurred over a decade ago. Were lessons learned? The reliance on oil has weakened slightly with more efficiencies and the increased use of alternative energy sources. However, 37 percent of the US energy consumption still comes from oil, 32 percent from natural gas and only 11 percent from renewable sources. We are still as a nation too dependent on nonrenewable sources. And that comes with a price. The rise of fracking prompted a celebration that the United States could now achieve energy dependence at a relatively cheap price. However, it came with environmental costs. There are downsides to the fracking revolution. Fracking pollutes the local water supply. The fluid that is used to fracture the rock contains acids, detergents, salts, lubricants, and disinfectant as well as other chemical additives to ensure that the oil and gas is released. Benzene has been discovered in local water supplies where fracking occurs. There is also air pollution as some of the natural gas leaks into the atmosphere. There is also the strange case of fracking causing earthquakes. In Ohio, Oklahoma and Texas the number of earthquakes has increased in direct association with the increase in fracking. The culprit is the injection deep underground of the millions of gallons of wastewater byproducts. Before 2009, and the large-scale fracking in the state, Oklahoma experienced 2 earthquakes a year. Since 2009 and with widespread fracking, it now experiences two a day. Earthquakes of magnitude of 3 or higher have increased from 20 to 700 a year. We may get cheaper gas and oil but also polluted water and, in some places, a greater incidence of earthquakes. In 2011, the Bureau of Safety and Environmental Enforcement (BSEE) was created to separate enforcement activities from federal lease management activities. It was meant to reduce the possibility of conflicts and regulatory capture Oil drilling in the Gulf remains a dangerous business. One study concluded that offshore oil and gas exploration has become safer since the blowout, but significant risks remain and the BSEE enforcement played no role in the improvement.8 There are still criticisms of the BOEM for not modernizing and improving the regulations for offshore oil and gas planning, lease sales, and exploratory drilling. And since 2018 there has been rollback of regulatory authority for oil and gas.9 Regulatory capture continues. In 2018, the US Senate confirmed Jeffrey Bossert Clark to be the Assistant Attorney General for the Natural

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Resources Division in the Department of Justice. Mr. Clark had previously defended BP over the Deepwater Horizon oil spills against the federal government and Louisiana parishes. It was not an isolated case. He has spent most of his legal career in private practice defending big polluters against local and federal government. When the lawyer of the polluters becomes the leader of the government department charged with environmental protection, then regulatory capture is complete. In 2020 Clark was promoted to Acting Assistant Attorney General of the entire Civil Division of the US Department of Justice. He is not a scientist but has claimed that climate change is “contestable.” Regulatory capture remains a pervasive feature in the United States. On the one hand, big corporations continue to shape the agendas of government policy and on the other, leaders of regulatory agencies see their job as facilitators of business rather than as regulators. This state of affairs is reinforced under more neoliberal, anti-regulation administrations. It also occurs across different types of administrations. Consider the case of the Boeing 737 Max. In October 2018 in Indonesia and again in March 2019 in Ethiopia, the new jet nosedived into the ground killing 346 people. The company initially blamed pilot error. But a US House Transportation Committee report revealed flaws in the development of the plane’s design.10 Boeing’s chief project engineer had signed off on critical changes to design without being aware of how the software worked to give pilots warning of a catastrophic failure. Building highly complex engineering systems is fraught business and things can go wrong, but in this case regulatory failure was a major cause. The report revealed how the government agency charged with overseeing plane design and production, the Federal Aviation Authority (FAA), failed in its missions. The report described “grossly insufficient oversight by the FAA.” There was too cozy a relationship between key Boeing personnel and FAA officials despite Boeing’s poor record in fixing safety problems The FAA’s safety branch was too receptive to the demands of Boeing and other companies. The FAA was too deferential and accommodating to Boeing allowing the plane’s certification to fly with inadequate scrutiny. The regulatory capture was a key component in two air disasters. Even after the crashes the FAA was looking to speed up the approval of critical safety issues. Despite the disaster the FAA was reducing careful oversight. The regulatory agency had been captured by the companies it was supposed to be regulating. The result in this case was catastrophic as two planes nosedived into the ground killing all the passengers and crew on board.

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Since the blowout we are still too reliant on nonrenewable energy sources that come with a variety of risks, and government oversight is too prone to regulatory capture. Deepwater Horizon and the 737 Max crashes reveal the deadly costs to this capture. And they continue to be paid.

Notes 1. Margolis, M. (2010, September). Drilling deep. Discover, 76, 48–51. 2. Bo, E. D. (2006). Regulatory capture: A review. Oxford Review of Economic Policy, 22, 203–225. Yeoh, P. (2019). Capture of regulatory agencies: A time for reflection again. Business Law Review, 40, 134–145. 3. Bower, T. (2010). Oil: Money, politics and power in the 21st century. Grand Central. 4. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. (2011). Deep water: The Gulf Oil disaster and the future of offshore drilling. http://www.gpoaccess.gov/deepwater/deepwater.pdf. Accessed 21 Aug 2011. Quoted on page 219. 5. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Deep water: The Gulf Oil disaster and the future of offshore drilling. 6. Department of Interior. (2011). Report regarding the causes of the April 20, 2011 Macondo Well Blowout. http://www.boemre.gov/pdfs/ maps/DWHFINAL.pdf. Accessed 15 Sept 2011. See also the Deepwater Horizon Joint Investigation official website at http://www.deepwaterjoi ntinvestigation.com/go/site/3043/. Accessed 15 June 2011. 7. https://www.justice.gov/enrd/file/834511/download. 8. Gernand, J. M. (2019). An analysis of the trends in US offshore oil and gas safety and environmental performance. In ASME International Mechanical Engineering Congress and Exposition. https://asmedigitalc ollection.asme.org/IMECE/proceedings-abstract/IMECE2019/83501/ V013T13A020/1073552. 9. Hartsig, A., et al. (2016). Next steps to reform the regulations governing offshore oil and gas planning and leasing. Alaska Law Review, 33, 1. Voiter, M., & Hoskins, D. (2019). Dirty drilling: Trump administration proposals weaken key safety protections. Oceana. https://usa.oceana.org/ sites/default/files/offshore_drilling_safety_report_final_0.pdf. 10. U.S. House Committee on Transportation and Infrastructure. (2020). The design, development and certification of the Boeing 737 Max. https://tin yurl.com/y5yb6fq8. Accessed 17 Sept 2020.

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Further Reading Achenbach, J. (2011). A hole at the bottom of the sea: The race to kill the BP oil gusher. Simon and Schuster. Ainsworth, C. H., Paris, C. B., Perlin, N., et al. (2018). Impacts of the Deepwater Horizon oil spill evaluated using an end-to-end ecosystem model. PLoS ONE, 13(1), e0190840. Almedia, P. D., & Silva, P. D. (2011). Timing and future consequences of the peak of oil production. Futures, 43, 1044–1055. Beedasy, J., Petkova, E. P., Lackner, S., & Sury, J. (2020). Gulf Coast parents speak: Children’s health in the aftermath of the Deepwater Horizon oil spill. Environmental Hazards, 1–16. Boebert, E., & Blossom, J. M. (2016). Deepwater Horizon. Harvard University Press. Bridge, G., & Wood, A. (Eds.). (2010). Geographies of peak oil: Special issue. Geoforum, 41, 523–605. Cavnar, B. (2010). Disaster on the horizon: High stakes, high risks and the story behind the deepwater well blowout. Chelsea Green. Coll, S. (2012). Private empire: ExxonMobil and American Power. Penguin. Cope, M. R., Slack, T., Jackson, J. E., & Parks, V. (2020). Community sentiment following the Deepwater Horizon oil spill disaster: A test of time, systemic community, and corrosive community models. Journal of Rural Studies, 74, 124–132. Department of Interior. (2011). Report regarding the causes of the April 20, 2011 Macondo Well Blowout. http://www.boemre.gov/pdfs/maps/DWHFINAL. pdf. Accessed 15 Sept 2011. Freudenberg, W. R. (2011). Blowout in the Gulf: The BP oil spill disaster and the future of energy in America. MIT Press. Fisher, C. R., Montagna, P. A., & Sutton, T. T. (2016). How did the Deepwater Horizon oil spill impact deep-sea ecosystems? Oceanography, 29, 182–195. Kassinis, G., & Panayiotou, A. (2017). Visuality as green washing: The case of BP and Deepwater Horizon. Organization and Environment, 31, 25–47. Khatchadourian, R. (2011, March 14). The Gulf War. The New Yorker, pp. 37– 59. Kujawinski, E. B., Reddy, C. M., Rodgers, R. P. et. al., (2020) The first decade of scientific insights from the Deepwater Horizon oil release. Nature Reviews Earth & Environment, pp. 1–14. Lee, Y. G., Garza-Gomez, X., & Lee, R. M. (2018). Ultimate costs of the disaster: Seven years after the Deepwater Horizon oil spill. Journal of Corporate Accounting and Finance, 29, 69–79. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. (2011). Deep water: The Gulf Oil disaster and the future of offshore drilling. http://www.gpoaccess.gov/deepwater/deepwater.pdf. Accessed 21 Aug 2011.

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Ramchand, R., Seelam, R., Parks, V., et al. (2019). Exposure to the Deepwater Horizon oil spill, associated resource loss, and long-term mental and behavioral outcomes. Disaster Medicine and Public Health Preparedness, 13, 889–897. Reed, S., & Fitzgerald, A. (2011). In too deep: BP and the drilling race that took it down. Bloomberg Press. Safinia, C. (2011). A sea in flames: The Deepwater Horizon Oil blowout. Crown. Slack, T., Kroeger, R. A., Stroope, S., et. al. (2020, July 27). Deepwater Horizon oil spill exposure and child health: A longitudinal analysis. Population and Environment, pp. 1–24.

CHAPTER 6

The Pandemic and the Costs of an Unhealthy America

The President of the United States is given a top-secret daily briefing. On January 28, 2020, the President’s national security advisor told him that a recent viral outbreak in China could pose a great security threat, perhaps the greatest of his presidency. The deputy national security advisor went on to compare its potential impact to the influenza pandemic of 1918 that infected a third of the world’s total population and killed 500 million people worldwide and 675,000 in the United States.1 Publicly, however, the President downplayed the virus and failed to promote the wearing of masks, urged early reopening and undermined the recommendations of his most senior scientific advisors. Despite the early warning, the US experienced the worst pandemic since 1981 with infection and death rates higher than many other countries. However, the pandemic did more than reveal the incompetency and mismanagement of one inept President and his incompetent administration, although it did that. As the pandemic swept across the United States it provided a tragic stress test that revealed the fractures in the public health system of the world’s richest country. The pandemic was a global tragedy that played out in different countries. It was a massive stress test that exposed long-standing issues both shared and also unique to individual countries. Take the case of Spain with one of the highest death tolls in the first wave in March 2020. A second wave in the Fall meant another spike in fatalities. Yet, Spaniards had one of the highest rates of mask wearing, close to 84 percent. What the spread © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8_6

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of the pandemic in Spain showed was not public unwillingness to abide by safety recommendations, but government incompetence. The lockdown was loosened too early, international tourism was reopened too soon and the health care was devolved too early to regional authorities. The usual politics in Spain of an insular, incompetent political class without public scrutiny, was laid bare by the pandemic.2 The pandemic was a giant stress test that revealed the cracks and strains of all countries. Some of the fractures were just below the surface, others were deep-seated. In the United States, the pandemic highlighted deep, long-lasting issues including a health system that was more geared to making money than providing health care for all, a decline of public health, hyper partisanship, and attacks on science. The glaring cleavages in US society were also highlighted by the pandemic, revealing yet again the injustices of class and race in the body politic.

The Pandemic It originated in China. A novel respiratory disease was identified in the city of Wuhan in December 2019. It developed sometime between October and November 2019 when a bat coronavirus, perhaps combined with a pangolin virus, entered the human population, probably through people who were processing bat carcasses for traditional Chinese medicine. The virus was given the name of severe acute respiratory system coronavirus-2 (SARS-CoV-2). The disease it causes, a respiratory illness that can be fatal, was named COVID-19. It spread quickly and by the end of September 2020, it had infected over 32 million people and caused over a million deaths. Both figures are probably severe underestimates. In this chapter, I will focus on the United States. However, it is also important to discuss the global context behind the deadly pandemic. Two factors are important. The first is that the rate of land use conversion is increasing. As we turn the wild areas and especially tropical rainforests into farmland, pasture, and urban areas, we are being exposed to more human-pathogen interactions and more cross-species spillovers. One study found that conversion of wild places into farmland eradicates the large species allowing more of the smaller animals, such as bats and rats that carry the most pathogens.3 Over 60 percent of new infectious diseases come from animals. When we transform the wild areas, we increase the possibility of more new viruses, for which we have no immunity. Large cities, particularly in tropical areas

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with greater mammal diversity in the surrounding areas, have higher probabilities for human emergent infectious diseases.4 HIV, SARS, and Zika are just some of the more recent infectious diseases that originated in wild animals in tropical areas. The COVID-19 pandemic reveals the zoonotic threat caused by land use conversion of wildlands into farmland, pasture, and urban areas. The second is space-time convergence. If we measure the distance between places in terms of the time taken to travel, there has been a dramatic reduction in time taken. In 1800 it took three and half days to travel the 190 miles from Boston to New York by stagecoach. By 1920 it took 6 hours by train. The two cities grew closer together. Space-time convergence has an impact in disease transmission. Take the case of Fiji. It used to be measles-free. It is located over 2000 miles from Sydney. In the time of sail, it took between 25 and 30 days to sail from Sydney to Fiji. The incubation period of measles is 14 days. So, in the time of sail, people who contracted measles in Sydney would be unable to transmit the disease in their travels to Fiji. The use of motorized vessels reduced the space-time distance. In 1876 a motorized launch took a Fijian chief and his entourage to the city and back again in little more than 19 days. The motor launch that brought back the chief also brought the measles virus. With no natural immunity, the disease killed 40,000 people, almost a third of the entire population of the islands. Today, it takes only five hours to fly from Sydney to Nadi airport in Fiji. Diseases spread more quickly in a shrinking world quickly turning local outbreaks into epidemics. We have more new and dangerous viruses just as we live in a more globally connected world. Covid-19 spread quickly around the world through air passengers. In the first two weeks of January 2020, there were 1300 flights from China to the United States, depositing 380,000 people including 4000 who came directly from Wuhan. The devastating impact on New York City was from an air passenger corridor from China to Italy to the United States. The virus spread out from these global hubs to the surrounding areas. In the city of Houston, for example, the virus came with international travelers, first impacting the white, affluent neighborhoods before moving onto the lower-income minority communities in the city. In many cities it was the more affluent global travelers, the rich cosmopolitans, who brought the disease. A similar tale can be told for cities in South America and Asia.

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Within months, perhaps weeks, of the first outbreak, the disease seeded and spread around the world.5 Globalization has “smoothed” the world, making disease transmissions, especially one spread by person-to-person contact, all that more rapid and virulent. Globalization is an accelerant capable of turning outbreaks into epidemics and epidemics into pandemics. Resistance to globalization and calls for national biosecurity likely will be strengthened as a result of this pandemic. The response of closing borders to halt the spread reinforces a sense of individual nations acting in opposition to global threats. The lockdowns are a form of “global distancing” between nations, matching the “social distancing” between persons within the nation-states. By revalorizing the national in contrast to the global, this pandemic secures nationalist narratives, which likely will remain strong even when a vaccine is produced, and there is return to a semblance of “normal.” This pandemic does not spell the end of globalization, but nonetheless reinforces the rhetoric of narrow nationalism.

The Pandemic in the United States The first case of COVID-19 was confirmed on January 20, 2020, in Washington state. The man had traveled to Wuhan. A month later there were still only 14 detected cases. They were all linked to travel from China. The recorded first case of local transmission that involved no travel to an outbreak area nor contact with anyone diagnosed with the virus, occurred in California on February 26th. Three days later the first recorded death from COVID-19 was reported in the state of Washington. In February, a chain of transmission from China to Italy to New York City led to an outbreak along the East Coast. A national emergency was declared on March 13. Two days later, the disease was present in all 50 states. By March 26, the United States led the world in COVID-19 cases. By May 27, the US death toll passed 100,000. On September 22, 2020, the death toll reached 200,000. All the countries of the world were impacted by the pandemic. But to varying extents and in different ways. One useful metric is deaths per 100,000. It is not an ideal measure since not all COVID-related deaths are tabulated as such and there are differences in recording cause of death. Nevertheless, despite these caveats, it is a useful if crude measure. At the end of September 2020, Peru had the highest death rate at 110.48 followed by Bolivia, Brazil, Chile, Spain, and the United States at 62.5.

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The US rate was similar to the UK at 63.2 but twice as high as Canada and six times higher than Denmark or Germany. For one of the world’s richest countries with an affluent population and sophisticated medical system, it was a dismal performance. What went wrong? There were the obvious political issues, the President of the United States did not wear a mask in public until July 11. There were deeper flaws behind the failings of a particularly incompetent and chaotic administration.

The Health System The pandemic revealed some of the major structural flaws of the US health system. I will concentrate on just four. First, the United States has one of the least effective and most costly systems of any developed country. A good metric of overall health care is life expectancy, the average length of life. The US ranks 28th in the world. Americans live on average five years less than people in Switzerland, Italy, Canada and Costa Rica.6 In terms of cost, however, the US tops the charts at $11,072 per capita.7 The next highest is Switzerland at $7732. Switzerland, like most other rich countries, produces better health outcomes at much less cost. Why is that? Anne Case and Angus Deaton point the finger at the healthcare industry.8 Not because it is a private market system, but because it manages to distort the market. They describe it as a rent seeking monopoly that manages to squeeze extra profit from the market without improving health outcomes. They show that we pay an extra $1 trillion more than is needed for high quality health care. Big pharmaceutical companies, expensive medical equipment suppliers, and very well-paid doctors and health care executives swallow up the “extra.” We could, for example, dramatically increase the number of doctors but medical schools and immigration policies limit the number and hence increasing the demand and the resultant compensation. Debates about reforming health care system reform are often too restricted to the choice between public versus private health care. Calls for universal health coverage are becoming more common. My point is not that the fault lies just in the private nature of the health system coverage, but that it is a wasteful and inefficient private system where too much of the money, time and energies are devoted to documentation and billing. Every doctor’s office I have ever visited in the United States has at least one person whose sole job is to navigate the Kafkaesque administrative system of insurance billing. US health care is a bloated system that

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manages to extract 20 percent of the nation’s gross domestic product and rip off the American public without providing first-class health care for all. Second, the reliance on employer-based insurance punishes the unemployed and lower waged as companies minimize the health coverage of lower-paid workers. The result was obvious before the pandemic. Case and Deaton show an increase in mortality and hence declining life expectancy for poor whites without a college degree. They highlight the growing diseases of despair associated with opioid addiction and alcohol abuse. More generally, they point to a declining health provision for lower-income groups. The hollowing out of the white working class, the racial disparity in health provision, and outcomes were all occurring before the pandemic. COVID’s high death rate in the US reflects a health system capable of expensive treatment and very good care for the employed and affluent, but unable to provide good health coverage for those of modest incomes. The health care system not only fails to provide universal medical coverage, but it also actively operates as an engine of inequality as the more affluent get tax-subsidized health coverage while the lower-income groups receive poor quality service. The inequities of health provision were revealed starkly by the pandemic, but they were there all the time. Third, the public health system is undermined by the combination of political interference with organizational fragmentation. The US public health system responsible for pandemics is fragmented between different federal authorities and the individual states. The Center for Disease Control (CDC) is the nation’s health protection agency. It was established to fight against pathogens and pandemics. It has a budget of $8 billion and legions of dedicated scientists. The head is a political appointment. A major cause of stress in the United States is the political rather than the professional appointment of senior influential positions. The CDC had a hard time getting its message out against a President who undercut much of their advice. It did not help that the CDC made lots of errors developing testing devices and giving mixed advice about the aerosol spread of the disease.9 But these are not major endemic stresses. All large bureaucracies can make mistakes. It is the form of the mistakes that is troubling. The CDC has been politicized and effectively muzzled by political operatives. In fact, all major federal agencies have political appointees. They can wield enormous power over messaging. Generally, they work to put the administration in a good light. They are essentially political hacks who wield power over scientists and administrators. When the science seems to

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contradict the administration then the political appointees can, and in this case did, undermine the science and promote more flattering narratives. Not much of a problem if the issue is the monthly pig production figures from the Department of Agriculture. In this case, however, the political censorship led to conflicting and confusing information to the US public. The CDC and National Institute of Health (NIH) experts cannot speak to the press without approval by political appointees. The federal authorities charged with providing accurate and science-based information to the American public were subject to political censorship. The political censorship of federal science is a recurring stress fracture in the United States. The CDC makes recommendations for the nation, but there are also State Health Departments. They have numerous roles from regulating professions and facilities, from massage parlors to body piercing salons, to testing air and water and implementing consumer safety. State health departments are also responsible for providing data and policies related to COVID. As with the CDC, there was political interference with the work of scientists overridden by political appointees eager to suppress unflattering data. The result was a mosaic of different state mandates about openings, the wearing of face masks, and the discouragement of public gatherings. The variety of different state mandates led to public uncertainty and the less stringent states effectively facilitating outbreaks spilling out to neighboring states. In effect, the proliferation and fragmentation of politically impacted public health authorities led to confusion, uncertainty and varying standards of community enforcement. The fragmentation was most obvious in the competition between states for vital personal protection equipment (PPE) for front line responders. In the early days of the pandemic, many states were unable to access any federal supplies and had to compete with each other on the open market to purchase vital lifesaving equipment. The result was limited supplies and high prices. The governor of Maryland felt he had to call in favors from South Korea to have PPE equipment shipped by air from Seoul to Baltimore. The inefficient and bungled response was due in part function of a fragmented and underfunded public health system. Fourth, at the most local, and hence potentially most responsive level, public health authorities have been undermined for years. There are also 2000 local health departments, many at the county level, charged to promote community health. They are responsible for health surveys and tracing. They have faced years of budget cuts and chronic underfunding.

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From 2003 to 2019, CDC funding for state and local preparedness for public health emergencies was cut by a third.10 It is part of the hollowing out of the state and especially public health organizations that promote community health. One direct consequence was the lack of proper oversight of nursing homes. They were a disaster waiting to happen after years of poor care and lax standards. Poor federal oversight and limited state and local enforcement of basic health and safety standards led to serial violators continuing to operate. So, when the pandemic hit, its deadly effect on older people with chronic conditions led to the tragedy of very high death rates. In many states nursing home deaths represented a third of all deaths due to COVID-19 The lack of oversight and the chronic underfunding and lack of investments in the nation’s public health system led to the poor response to COVID-19. In effect, the US health system is geared up to providing expensive medical care for the already affluent at the expense of the poor, while the public health system responsible for pandemics is either subject to political cronyism or budget cuts. The pandemic hit a First World country with a Second, and in some places a Third World, health care system.

The Tattered Social Safety Net Worldwide, the pandemic created economic chaos. Lockdowns and restrictions closed down substantial parts of the global economy. However, the response varied by wealth. In the poorer countries, with large informal economies, more people were simply left adrift. The decades long reduction on absolute poverty was reversed as people lost their income and received little or no support from their government. The richer countries were better placed to help their citizens. Across Europe, for example, enhanced support allowed people to remain in employment.11 And since health was largely based on citizenship rather than income or working status, health care provision was maintained. In the US, in contrast, the lack of a safety net was exposed. By early Spring 2020, more than 30 million people were rendered unemployed, many of them applying for aid through dysfunctional state employment systems. While major corporations were rendered safe much of the working population were thrown into unemployment often able to get assistance only through a mixture of luck, the state they lived in, and persistence rather than as a right of citizenship. The pandemic revealed the tattered nature of the US social safety net.

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The United States has a flexible job market that allows few protections to workers. People move from declining to expanding sectors more easily than in Europe where job security is much higher and youth unemployment is consequently much higher as well. The downside, however, is the ease with which companies can sack employees. In the pandemic the lack of worker protection augured mass layoff once employment protection ceased. Unemployment in the United States hovered for months between 20 and 30 percent. It was only 6 percent in Germany. In many countries in Europe the government paid to keep workers on payroll. There are costs to this European choice. Zombie jobs may last longer as governments continue to subsidize declining sectors. Younger people find it harder to get work as older, already employed workers are secured. However, the US model also has costs. People who are made unemployed face trauma and they find it harder and longer to return to employment. The impact is most marked for lower-income workers and ethnic and racial minorities. Unemployment payments also vary across the country with Republican-controlled states particularly stingy. At the federal level the stimulus package created in the immediate wake of the pandemic, that paid people $1200, soon ran out. And while the US Senate rushed through the nomination of a conservative jurist to the Supreme Court in a matter of weeks, a much-needed stimulus spending package that would have provided some relief languished in inaction and bickering. The safety net in the United States is filled with such big holes that even the solidly middle-class can slip through. Ray Suarez, a well-known broadcaster and commentator tells a painful story of how he fell through the cracks of the system.12 He moved to the gig economy but had to provide for expensive private health care. Costs rose after he needed expensive dental treatment after a bike accident. He also had to pay for the college education of his three children. He got older. And ageing is not a good thing in the job market. Wages decline for older workers and have trailed behind younger workers for the last three decades. From 1990 to 2019 the median wage for men over 55 with a bachelor’s degree declined by 2.9 percent. For men aged 35–54, it increased by 8.7 percent. Older workers lost bargaining power due to less geographic flexibility and age discrimination. The pandemic meant less appearances and speaking engagements and dried up his source of income just as his household costs were increasing. Ray Suarez is not poor, but the fragility of his middle-class status can be retold for millions of Americans with an added tweak for women and minorities. The wider story he embodies is the

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fragile nature of the safety net in the United States. Many people are only one, two, or at most three paychecks from financial collapse. The American Dream for too many is based on a thin, fragile surface. Below them is little support. Compared to Europe, many in the US lack the social wage of free health care, easier access to good and cheaper education and generous unemployed benefits. The second gilded age of growing wealth accumulation only at the very top and widening inequality has eroded the foundations of a secure working- and middle-class life. The impact will have lasting effects. It will increase inequality as the recovery is not so much a U as a K with the already wealthy soon recovering with the poorest seeing marked reduction in employment opportunities. The pandemic will make an already unequal United States even more unequal. When companies lay off workers, it takes several months if not years, after an expansion begins, to find, hire, train and integrate new workers. The collapse happens in a very short time, but a recovery takes longer and may take years to recover. The failure to provide air to state and local governments will also lead to more layoffs and a lengthening of the time of a full post-pandemic economic recovery. One study of the Great Recession found permanent effects on young workers.13 The recession impacted the cohort’s income, health, and future wealth-generating power. A similar effect is expected for the COVID-pandemic. Those entering the job market in the time of COVID will see reduced income now and into the near future. COVID-19 revealed that too many in the United States live on a thin ice of precarity and only poorly protected by a tattered and worn social safety net.

The Burden of National Ideologies All countries have national ideologies; sets of ideas that celebrate the unique qualities of the state and its citizenry. These ideologies can be tremendously positive, providing a rallying cry during times of national emergency, providing comfort during periods of suffering. They can also, however, become debilitating when they are no longer either apt or appropriate for new conditions. The pandemic hit all the countries in the world. In some it reinforced the fear of the foreign other, in others it was the fear of the domestic other. In a few it was a positive force, such as New Zealand, that saw solutions in coherent national and shared community

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responses. The US faced the pandemic with a number of ideologies that worsened the crisis. I will look at three in particular. First, there is the cult of individualism and an associated distrust of the state. Its origins lie in the early Republic. The emphasis on individual rights was meant to form a zone of protection against the incursions of a distant monarch. Rights were promoted over obligations. The French observer Tocqueville remarked that he found individualism particularly strong in the United States when he visited in the 1830s.14 He was critical of its pervasive quality and described it as a withdrawing from community and from the responsibilities of public life and citizenship. Fast-forward almost two centuries and the United States is still dealing with the problems promoting responsible citizenship. The fetishization of individual rights is most apparent in the decision on whether to wear a mask or not wear a mask. Over 40 percent of those not wearing a mask, said that it was because of their right as an American not to wear a mask.15 All number of commentators and bloggers see the government health officials request to wear a mask as an abrogation of their individual rights. One former Olympian, Kerri Walsh, in an Instagram since deleted, described herself as brave for not masking. She saw it not as dangerous to her fellow citizens, most of them much more vulnerable than her, but as an act of individual freedom. This, by the way, was one of the more thoughtful tirades. She even quoted Ralph Waldo Emerson and Thomas Jefferson, the go-to-guys in the cult of individualism. But at its heart the cult is a view of society as individuals constituted only of private desires, their only responsibility to their own subjectivity. It is society as the projection of the subjective self. The distrust of government closely tied to the individualism element in US national ideology has been reinforced by a neoliberalism that has worked to hollow out the state by minimizing its important regulatory functions. The state has declining legitimacy with a steady decline in trust in government. The Pew Research Center has conducted polls on how much US citizens trust the federal government. In 1964 over 70 recorded trust in the institution. By November 2015 it had fallen to 19 percent, less than one in five of Americans.16 Trust and confidence in government waxes and wanes; an unpopular war or economic recession deflating the numbers only to be reflated again when the war ends or when the economy picks up. But the ending of the long postwar boom and the declining confidence in the economic globalization project has raised a structural rather than just a temporal crisis of confidence.

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Unmet political demands cause a legitimation crises. In the United States a number of popular sentiments are not given political articulation by the two mainstream parties. The Republican Party used its post-Reagan, working-class base as electoral cannon fodder to promote an agenda that aided its big donors. The blue-collar base was fed rhetoric while the business wing received all the benefits of free trade and the disciplining unions. The rhetoric was effective in undermining the legitimacy of not only Democratic Administrations, but also of government itself. Trump is the most recent embodiment of this manifestation, but earlier Regan said that government itself was the problem. Meanwhile the Democratic Administrations of Clinton and Obama pursued an economic agenda that promoted globalization. If the Republicans had a trickledown theory that believed, despite evidence to the contrary, that making the rich richer would benefit everyone, the Democratic equivalent was that the benefits of globalization would eventually raise all boats. In the long-term maybe. But in the short to medium term, where we actually live, it negatively impacted the bottom 50 percent. Many of the blue-collar workers felt ignored by Democrats who promoted economic globalization that undercut their jobs and a cultural relativism that undermined their values. Cynically used by the Republicans and shabbily treated by the Democrats, many turned to Trump. As a family made millionaire not quite the obvious standard bearer of the marginalized, but his outsider status and maverick campaign resonated with a substantial mass of Americans harboring a sense of alienation from the mainstream political parties. There are no easy answers as when to initiate a lockdown. Too late and the virus may establish a strong hold. Too long and the economic costs mount alarmingly. There are tremendous costs to closing business or conducting education online that cannot be easily dismissed. And often the costs are regressive with the most vulnerable paying the highest price. My point is not that there are no difficult decisions and no grey areas, but that the United States has a harder time even accepting minimal public health measures that impinge on individual behaviors. To be honest wearing a mask is a pain. It restricts breathing and makes you feel uncomfortable. But we require people to do all manner of things that restrict choice if there is a clear and recognizable public good. We require people to wear seat belts, take out car insurance, stay seated when a plane takes off or lands. We put restraints on individual behavior for the public good. We are restricted in where we can dump our rubbish, how

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fast to drive, how to discipline our children. Sometimes the public good is difficult to identify. Not in this case. We are not free-floating individuals kept aloft by our subjective preferences. We are members of a society with rights and obligations. In this particular context, you have the community obligation to wear a mask when close to other people to reduce the risk to them and to the wider community. Resistance to mask wearing in public during the pandemic is not restricted to the United States. But few other countries have imbibed two centuries of an ideology of individual rights to bolster their case and to promote selfishness and irresponsible behaviors as key principle of what it means to be free.17 American individualism is an obstacle to wider mask wearing in the United States, and the result is one of the higher death rates in the world.18 Second, there is an American exceptionalism that sees the country as different from the rest of the world, better. There is a basis for the assertion. It is one of the largest, most affluent countries with a constitutional basis that remains one of the oldest and most sustained in the world. The more ideological elements of American exceptionalism idealize the country as a bastion of freedom and democracy, the best hope for the world because it is uniquely favored by history and God. Other countries share a similar narrative. Brazil, Chile and the UK also see themselves as different and better than other countries. It is interesting to note that all four countries have higher rates of infection and death than their peers. This is no accident. One anthropologist argues that because the four countries share similar view of themselves as different, it led to overconfidence in their ability to deal with the pandemic.19 Hubris in the United States played out in the withdrawal from global health organizations, resistance to global scientific advice and failure to learn or indeed want to learn from other countries. The insularity of exceptionalism meant the United States was unable and definitely unwilling to learn from other countries. The shining example of Taiwan for example was not adopted. Taiwan learned from its experience of SARS in 2003 and built an efficient public–private partnership along with tight travel restrictions, constant testing and tracing and the quick and thick establishment of rapid testing sites available to all. It is a stark comparison to the bumbling approach of the United States. The results are obvious. Taiwan has one of the lowest infections and death rates. By the beginning of October 2020, only 0.3 per million people in Taiwan have died. The figure for the United States is 649 per million. Exceptionalism tends to eschew learning from other countries. What’s the point if there is a fundamental belief that the United

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States is somehow better than other countries. The superpower does not need a role model. The United States knows best is a common theme that leads to a culture of insularity that failed miserably the stress test of the pandemic.20 Finally, there is a complex relationship in the United States between faith and science. Both were important foundational elements in the creation of the Republic. And they continue to survive together. The United States has some of the best universities in the world while religious observance in the United States is higher than peer counties. While 88 percent of Americans had some belief in God, the figure for Europe was 63 percent and as low as 34 percent in the comparable country of the UK.21 At least 63 percent of the US population were absolutely certain in their belief in God and a majority said they would not vote for an atheist. The separation of church and state has helped religion flourish in the United States. Religion plays a very important role in American life and politics. The Republic owes its origins to faith. The United States was a place to escape from religious persecution, even before it was the United States. Religiosity took on a more political flavor in the 1950s when it was counterpoised with the atheistic communist USSR. It was only in 1957 that “In God We Trust” became the national motto. The rise of Evangelical Christianity in the 1979s and 1980s brought a more profound partisanship with evangelicals tending to vote Republican and religious observance more aligned with political parties over issues such as civil rights and abortion. The United States was never a theocracy. Indeed, many of the early founders had an unshakeable belief in the power of reason and the importance of science in the life of the nation. The American Revolution was as much an expression of the Enlightenment as it was of religious belief. And so, science and faith have coexisted in the United States. More recently, however, the coexistence has been tested as emerging issues have caused a divide between science and religious beliefs. Evolution and climate change have become wedge issues between science and some of the faithful. There are a variety of beliefs even with the same religious traditions, but the rise of fundamentalism, part of a global trend as people respond to the ache of modernity and the disruption of change with a return to a seemingly solid foundation, has created a split between science and some communities of faith. Skepticism over evolution, climate change, and vaccinations are now part of the fabric of some religious beliefs in the United States. When the pandemic swept

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through the United States it came to a land where significant numbers lauded belief over rationality and religious teachings over science. The failure to wear masks, the belief in bogus medicines and cures, and the failure to take the virus seriously or trust the consensus of medical advice was not unique to the United States but few advanced countries had such a background of anti-science and faith-based narratives.

Political Partisanship and the Failure of Governance According to the Global Health Security index prepared in 2019, the United States was the best prepared country to deal with a pandemic.22 It was rich enough to make large expenditures with a huge reservoir of medical and scientific expertise in fighting epidemics around the world. It also had prepared plans to deal with a pandemic. In fact, two sets of plans. George W. Bush, when he was President, promoted an ambitious $7 billion strategy to deal with a pandemic. It called for early detection, cooperation between internal agencies and other counties, stockpiling of vaccines and medical equipment, and public education. In 2016 under the Obama Administration, the National Security Council produced a document entitled “Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats and Biological Incidents.” The United States had not one but two playbooks to deal with a pandemic. Rich country, lots of expertise and two playbooks to draw upon, so you would expect a better response from the Trump Administration. What went wrong? In the spirit of this book, I will not deal with the incompetence of one specific administration but rather look to broader forces at work. In this case the growing partisanship in US politics. Political partisanship has long been part of everyday politics in the United States. However, it has been growing in recent years. There are a number of forces at work.23 There are growing cleavages. The United States is changing. Previously marginalized groups such as Blacks, gays and women now demand a larger role in the political discourse. There are more foreign immigrants. The possibility of a secure middle-class life for those without a college degree is disappearing from view. All of these challenge traditional notions of what America should be, sound like, and look like. While some people feel heartened by the progressive moves, others are deeply disturbed. There is an existential drama in the country with a toxic mix of cultural anxiety, economic pain, and political anger.

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Politics becomes less about deciding about the proper rate of income tax than about the very soul of the nation. The polarization is reinforced by the splintering of media options that allows readers, viewers, and listeners to have their opinions and beliefs reinforced and amplified rather than debated or challenged. In the closed circuitry of partisan media, the differences are amped up to rancorous levels. Political elites play a powerful role in heightening partisanship. While all citizens can exercise political choice it is the richer, well connected, and committed that wield political power in the United States. There is an asymmetric polarization. The Republican Party has shifted not just toward the right but to the fringes of the far right and now sees no distinction between its partisan agenda and the national interest, The Republican Party has, since the 1990s become a more extremist force ripping apart the big tent of moderate bipartisanship. It is getting worse. Two respected commentators wrote a book published in 2012 with the title It’s Even Worse Than It Looks that pointed to the role of the Republican Party in creating intolerant politics and governing paralysis. The 2015 edition which again highlighted the broken dysfunctional partisan political system had a slightly different title, It’s Even Worse Than it Was.24 Part of the polarization reflects racial differences. There was little difference in the 1950s between the main political parties. In the South the Democratic Party was associated with white supremacy while Republicans drew on both Whites and Blacks. Starting in the 1960s, however, there was growing separation as Democrats embraced civil rights and “lost” the South. The Republican “southern strategy” targeted and attracted whites in the South. By the early 2000s, the two parties had different support bases. The Republican became Whiter, more evangelical with many hardcore Trump supporters seeing White identity and their religion as under threat. The polarization was not just in support for the parties, it was an affective polarization, now embellished and adorned with deep feelings of anger and rage. So, while one-third of the United States thought Trump was great for the United States, another third saw him as a mortal threat to the Republic. The political anger and partisanship are also caused and reinforced by the mismatch between voters and policy outcomes. Most Americans, for example, want some form of gun control, but it has been impossible to achieve at the federal level. Powerful alliances operate to blunt the popular will of the people. That makes people angry and even more partisan. The very nature of government in the United States is also an important factor.

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Winning an election does not guarantee the ability to enact policy. The divided and fragmented government was constituted to make the link between winning an election and enacting legislation tenuous at best. So, the party that wins often has a hard time governing while the party not in power has no incentive to help in governing. The result is an intensification of the rhetoric without policy outcomes. So, the arguments heighten while there are often no policies enacted. The decline of party discipline and the rise of social media have made it more difficult for the political pragmatists of either party to promote bipartisan agendas. Political purism flourishes in time of partisanship and reinforces the partisanship. Over the past forty years, there has been a rise in negative partisanship whereby Americans largely align against one party rather than affiliating with the other. Partisan media outlets, such as Fox News, reinforce this negative partisanship.25 The lack of commonalities between the two parties’ supporters has made it easier for negative partisanship to flourish. As your political opponent is turned into the Un-American other, it is easier to see them as not fellow citizens but as extremists and to see political pragmatism and bipartisanship not as the very stuff of politics but as selling out to the enemy. The electoral system in the US reinforces the sense of frustration, as majority votes are often not translated into positive electoral outcomes. The hallmarks of a healthy democracy are that each vote should be counted and each one should count equally. This is not the case in the United States where the difference between popular will and political representation is growing. The rigging of the voting system for the US Senate so that some voters count more than others is not new but a foundational reality, an integral part of the electoral architecture of the country. It started at the beginning of the Republic when each state, despite differing population size, was allocated two senators. At the time of the First Congress in 1789 the population of the largest and smallest state, respectively, Virginia and Delaware—and we will only include free white males over 16 as befits the prioritization of the time—was 110, 936, and 11,783: roughly, 9 times differential. But by the time of the 2016 presidential election, the population of the most and least populous states, respectively, California and Wyoming, was, respectively, 39, 254, 503, and 585, 501. The differential had increased to 67. Senators from small states with reliably persistent voting preferences can amass seniority that bestows enormous power beyond their demographic significance. The current leader of the Senate, Mitch McConnell, co-represents a state

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with a total population of only 4.4 million and is 89.4 percent white with only 3.5 percent foreign-born while the US average is 71.7 percent white and 12.9 percent foreign-born. Senate representation reflects the political realities of the largely rural eighteenth century rather than the demographic realities of the metropolitan twenty-first century. More than a quarter of the entire US population resides in just 10 metro areas across only 16 states and 85 percent of all Americans now live in metro areas. The opinions of the metropolitan majority on such issues as gun control, abortion rights or immigration policy, are countermanded in the Senate by the preferences of voters in small, rural states. Political power no longer parallels demographic realities. To be sure the United States was never designed as a democracy but as a republic engineered to limit the power of the people and to prevent political convulsions. The multiple sources of governmental power were to be a check on unbridled power. Senators representing a minority of the US population can appoint justices to life-long tenure of the Supreme Court. The House of Representatives is supposed to even out the effects of states with different populations, but the pooling of Democratic voters into dense areas lessens their effectiveness, as they tend to win big in a few districts while Republicans have a wider national spread. The current system gives the Republicans an advantage over Democrats. And that does not factor in partisan gerrymandering, the manipulation of voting boundaries to engineer specific political outcomes. The US Constitution requires each state to establish new congressional districts every ten years to reflect the population changes measured by the census. This congressional redistricting is freighted with partisan political interests. Take the case of Utah. The results of the 2010 Census revealed enough population increase to justify increasing the number of congressional districts from 3 to 4. The Republicans control the state legislature and thus the redistricting. In the 2016 Congressional election Republicans won just 66 percent of all votes but because of the gerrymandered redistricting that neutered voters in more Democratic leaning Salt Lake City, they swept all four congressional seats. The Democrats picked up over a third of all votes in the state but won no congressional seats. Gerrymandering also occurs in Democratic-controlled Maryland, where the post-2010 redistricting packed Republican voters into a few districts. Over a third of all votes cast in the state in the 2016 congressional races were for Republican Party candidates but Republicans won only one out

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of 8 districts. But across the country gerrymandering favors Republicans. Gerrymandered districts produce safe seats and lock politicians into political postures than promote ideological purity and party loyalty over bipartisan negotiation. Primary voters in gerrymandered districts thus count more than the general voting public. It is the Electoral College that elects the President. Since 1888 the system worked well in that the popular vote and the Electoral College were in sync. However, in both 2000 and 2016 a President won without obtaining a majority of popular votes. If presidents were elected by a simple popular vote, we would have had President Hilary Clinton and President Gore. The Electoral College does not transmit the will of the people but is starting to undermine it. The Electoral College system also overvalues voters in large swing states such as Florida. Growing political partisanship has many causes and consequences. It becomes a major stress when partisanship becomes a barrier to an effective response to the pandemic. The Administration response was filtered through the lens of partisan advantage such as sending more supplies to Republican states more readily than Democratic-controlled states. Whether a state opened early or had lax rules on social distancing and mask wearing depended on the political party of the governor of the state and the ruling party in the state legislature. In other words, the response to a public health crisis was determined by political identity. When social distancing and wearing a mask became a political statement rather than a scientific recommendation, then we inhabit such an atmosphere of hyper partisanship that it, quite literally, infects the body politic.

A Reckoning of Fractures Revealed The pandemic swept through every state in the nation. However, its impact varied enormously. One study looked at health outcomes related to the pandemic between March and July of 2020. It found that the impact varied by employment status.26 The unemployed and lowerincome essential workers employed in health care, food services, and public fared the worst. They lived and worked in environments where the virus was more likely to be present and more easily spread. Their lower income and lack of health insurance reinforced the disparity. There were also disparities with the worst outcomes among Black, Native American, and Hispanics households. Many of those most impacted faced a

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triple exposure: they have a higher incidence of underlying health conditions; they are more likely to be exposed to the virus; and if the disease is contracted, have inadequate healthcare coverage to deal with its effects. Consider just one example. The worst outbreaks in Nebraska of COVID-19 were in the meatpacking industry. One in five of all those infected were meatpacking workers. The meatpacking industry is hard demanding work. Many of the workers are Hispanics and immigrants from Ethiopia, Somalia, and Myanmar. They depend on the jobs to provide for their families. Often, they have little choice but to work in unsafe conditions. One factory reported 786 cases, another 330 cases and a third 260. Many workers probably worked with the disease, afraid of losing their jobs. A vote to allow CDC guidelines in meat plants was rejected by the Nebraska legislature. Almost 40,000 workers in meatpacking factories across the country contracted the virus and 185 died.27 The pandemic disproportionality impacted racial and ethnic minorities with high rates of deaths in African American, Native American, and LatinX communities, roughly double of those in the White community.28 These groups have a higher percentage of underlying conditions such as diabetes that make the impact of the virus much and also had lower access to healthcare. According to the CDC, while Whites and Blacks make up 73 percent and 12 percent of the total US population, they made up 53 percent and 21 percent, respectively, of all US deaths from COVID.29 Like a corrosive acid the pandemic cruelly revealed the income, racial, and ethnic disparities in health status, health care provision, and health care outcomes that lie just below the surface of American life. Over the space of just over five months over 200,000 Americans died from a disease. The US rate was higher than comparable countries. American exceptionalism was most apparent when comparing deaths per capita. Starting in March 2020, both Europe and the US started from the same small base number. By mid-April, the US figure was double and by July, it was eight times higher. The comparison is starker when we consider the advantages of the United States compared to Europe. The pandemic hit Europe three week before the United States, theoretically giving extra time to learn about the need for effective treatment and testing. The United States has a relatively younger population, compared to Europe that has a more elderly and hence more vulnerable population. The United States also has a less dense population than Europe that should have dampened the spread. The region most similar to Europe,

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the Northeast, had over a third excess death rates than the worst hit country of Spain. The sparsely populated West had an excess death rate four times higher than more densely populated Germany. The coronavirus killed American at higher rates than in other rich countries. As early as May 2020, if the United States had similar death rates to Europe, almost 58,000 Americans would have been saved.30 The price of being an American was a greater likelihood of dying from COVID-19. The EU figure began to increase by September but so did the United States. By October 2020, the death rate in Japan became almost negligible, while the figure for the United States was over 600 per million In other words, when compared with similarly rich countries the United States was a dismal failure in keeping its citizens free from disease and safe from death. It was an abject failure. It was the cruelest of stress tests because it resulted in at least a hundred thousand excess deaths, untold suffering and long-lasting consequences on families and communities across the country. The pandemic revealed the endemic weaknesses in US health care, government and governance, and national belief systems. With only 4 percent of the world’s population the United States is currently home to 25 percent of the world’s COVID-19 deaths. In comparison with similar countries the United States did very badly in responding to a global pandemic. Many were keen to lay the blame at an especially incompetent federal response overseen by a President who denied the fatality of the virus and was more concerned with an economic recovery to ensure his electoral success than protecting the American people. It was a tragic failure. Yet blaming Trump and his inept administration is too easy if we are concerned with deeper fractures in the United States. These include an inadequate health care, a burdensome ideology of individualism, and a hyper-partisan politics that undermines good governance. Decades of underfunding public health and the hollowing out of the regulatory functions have all made the United States more vulnerable to the impact of the virus than most other rich countries. The price was paid most heavily by the elderly poor, the sick and the marginal, the Blacks and Hispanics, and the workers deemed essential but not important enough to be accorded decent health care. The pandemic revealed faults that had been building for years and in some cases decades. It revealed a system that punishes working people, a dysfunctional government and a failed state, The pandemic exposed the shortcomings, the inadequacies and ultimately, the lack of compassion in the supposedly world’s richest country.

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Notes 1. Woodward, B. (2020). Rage (pp. xiii–xv). Simon and Schuster. 2. Jiminez, D. (2020). There’s a simple reason Spain has been hard hit by coronavirus. New York Times. https://tinyurl.com/y3u2lg9n. Accessed 24 Sept 2020. 3. Gibb, R., Redding, D. W., & Chin, K. Q., et al. (2020). Zoonotic host diversity increases in human-dominated ecosystem. Nature. https://tin yurl.com/y3dhdpgh. 4. Santiago-Alarcon, D., & MacGregor-Fors, I. (2020). Cities and pandemics: Urban areas are ground zero for the transmission of emerging human infectious diseases. Journal of Urban Ecology, 6: juaa012. https:// doi.org/10.1093/jue/juaa012. 5. For a revealing graphical presentation, see https://www.washingtonpost. com/graphics/2020/world/coronavirus-pandemic-globalization/. 6. OECD. (2020). Life expectancy at birth (indicator). https://doi.org/10. 1787/27e0fc9d-en. Accessed 28 Sept 2020. 7. OECD. (2020). Health spending (indicator). https://doi.org/10.1787/ 8643de7e-en. Accessed 28 Sept 2020. 8. Case, A., & Deaton, A. (2020). Deaths of despair and the future of capitalism. Princeton University Press. 9. Sun, L. H., & Achenbach, J. (2020). CDC’s credibility is eroded by internal blunders and external attacks coronavirus vaccine looms. The Washington Post. https://www.washingtonpost.com/health/2020/ 09/28/cdc-under-attack/. 10. Faberman, R. K., et al. (2020). The impact of chronic underfunding on America’s public health system. Trust for America’s Health. https://www.tfah.org/wp-content/uploads/2020/04/TFAH20 20PublicHealthFunding.pdf. 11. Birnbaum, M. (2020). Coronavirus hits European economies but governments shield workers. The Washington Post. https://wapo.st/2VRBTaZ. 12. Suarez, R. (2020). Sinking feeling; I clung to the middle class as I aged. The pandemic pulled me under. The Washington Post. https://www.washingtonpost.com/outlook/2020/04/30/i-clungmiddle-class-i-aged-pandemic-pulled-me-under/?arc404=true. 13. Rothstein, J. (2017). The Great Recession and its aftermath. Russel Sage Foundation Journal of the Social Science, 3, 22–49. 14. de Tocqueville, A. (2004, first published 1835 and 1840). Democracy in America. New York Library of America. 15. Rothwell, J., & Makridis, C. (2020). Politics in wrecking America’s pandemic response. Brookings. https://www.brookings.edu/blog/upfront/2020/09/17/politics-is-wrecking-americas-pandemic-response/. 16. https://www.people-press.org/2015/11/23/1-trust-in-government1958-2015/.

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17. Krugman. (2020). The cult of selfishness is killing America. The New York Times. https://www.nytimes.com/2020/07/27/opinion/us-republ icans-coronavirus.html. 18. Vargas, E. D., & Sanchez, G. R. (2020). American individualism is an obstacle to wider mask wearing in the US. https://www.brookings.edu/ blog/up-front/2020/08/31/american-individualism-is-an-obstacle-towider-mask-wearing-in-the-us/. 19. Lincoln, M. (2020). Study the role of hubris in nations; covid19 response. Nature. https://www.nature.com/articles/d41586-02002596-8. 20. Konyndyk, J. (2020). Exceptionalism is killing Americans. Foreign Policy. https://www.foreignaffairs.com/articles/united-states/2020-0608/exceptionalism-killing-americans. 21. Stack Exchange. (2020). Why is the US so religious compared to other Western democracies? https://politics.stackexchange.com/questions/ 50983/why-is-the-us-so-religious-compared-to-other-western-democr acies. 22. https://www.ghsindex.org/wp-content/uploads/2019/10/2019-Glo bal-Health-Security-Index.pdf. 23. Klein, E. (2020). Why we’re polarized. Simon and Schuster. 24. Mann, T. E., & Ornstein, N. J. (2015). It’s even worse than it was. Basic. 25. Abramowitz, A. I., & Webster, S. W. (2018). Negative partisanship: Why Americans dislike parties but behave like rabid partisans. Political Psychology, 39, 119–135. 26. Grooms, J., Ortega, A., & Rubalcaba, J. A.-A. (2020). The Covid-19 public health and economic crisis leave vulnerable populations exposed. Brookings. https://tinyurl.com/y2w5gfhh. 27. Lussenhop, L. (2020). Tony Vargas in Nebraska: The human cost of political inaction on Covid. BBC News. https://www.bbc.com/news/worldus-canada-54183191. 28. Tai, D. B. G., Shah, A., & Doubeni, C. A., et al. (2020). The disproportionate impact of COVID-19 on racial and ethnic minorities in the United States. Clinical Infectious Diseases: ciaa815. https://doi.org/10. 1093/cid/ciaa815. 29. https://covid.cdc.gov/covid-data-tracker/#demographics. Accessed 14 Oct 2020. 30. Aron, J., & Muellbauer, J. (2020). The US excess mortality rate from COVID-19 is substantially worse than Europe. INET Oxford Working Paper No. 2020–11. https://www.inet.ox.ac.uk/files/revised-15.54-18May-20-Aron-Muellbauer-Revised-INET-Excess-Mortality-article-x.pdf.

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Further Reading Brown, C., & Ravallion, M. (2020). Inequality and the coronavirus: Socioeconomic covariates of behavioral responses and viral outcomes across US countries. National Bureau of Economic Research Working Paper 27549. https://www. nber.org/papers/w27549. Carter, D. P., & May, P. J. (2020). Making sense of the U.S. COVID-19 pandemic response: A policy regime perspective. Administrative Theory and Practice, 42, 265–277. Case, A., & Deaton, A. (2020). Deaths of despair and the future of capitalism. Princeton University Press. Center for Disease Control and Prevention. (2020a). CDC COVID data tracker. https://covid.cdc.gov/covid-data-tracker/#cases_totalcases. Center for Disease Control and Prevention. (2020b). Demographic trends of COVID-19 cases and deaths reported to CDC. https://covid.cdc.gov/coviddata-tracker/#demographics. Grooms, J., Ortega, A., & Rubalcaba, J. A.-A. (2020). The Covid-19 public health and economic crisis leave vulnerable populations exposed. Brookings. https:// tinyurl.com/y2w5gfhh. Faberman, R. K., et al. (2020). The impact of chronic underfunding on America’s public health system. Trust for America’s Health. https://www.tfah.org/wpcontent/uploads/2020/04/TFAH2020PublicHealthFunding.pdf. Feder, J. (2020). COVID-19 and the future of long-term care: The urgency of enhanced federal financing. Journal of Ageing and Social Policy, 32, 350–357. Johns Hopkins Coronavirus Resource Center. (2020). https://coronavirus. jhu.edu. Leonhardt, L. (2020). The unique U.S. failure to control the virus. The New York Times. https://www.nytimes.com/2020/08/06/us/coronavirus-us.html. Lincoln, M. (2020). Study the role of hubris in nations; Covid-19 response. Nature. https://www.nature.com/articles/d41586-020-02596-8. Micklethwait, J., & Wooldridge, A. (2020). The wake-up call: Why the pandemic has exposed the weakness of the west and how to fix it. HarperCollins. Rothwell, J., & Makridis, C. (2020). Politics in wrecking America’s pandemic response. Brookings. https://www.brookings.edu/blog/up-front/2020/09/ 17/politics-is-wrecking-americas-pandemic-response/. The New York Times. (2020). The coronavirus outbreak. https://tinyurl.com/y3q xzkhk. The Washington Post. (2020). Mapping Covid. https://www.washingtonpost. com/graphics/2020/world/mapping-spread-new-coronavirus/?itid=sf_cor onavirus.

CHAPTER 7

The United States of Stress

In the first decade of the twenty-first century, four major catastrophes befell the United States and at the end of the second, a major epidemic had killed, by the end of February 2021, almost half a million people. What did these events reveal, individually and collectively, about the United States? Let’s summarize the main fracture lines exposed by these major stress tests.

The Costs of Empire What deep structural flaws did the War on Terror and the invasion of Iraq highlight? In a word, Empire. The existence of a huge military, a global presence, and the accompanying domestic political will for, and national support of, military intervention all predisposed the United States to global involvement and military intervention. While the specific goals have shifted over the years since 1950, what remains unchanged until recently is the basic commitment to military superiority and countenance of the use of force around the world. That entails a vast military presence and an enormous defense budget. According to the Army’s own figures in 2020 there were 165,000 troops located in 150 countries.1 In 2020 the military budget of the Department of Defense was $721 billion and estimated to be $934 billion in 2020–2021. The total federal budget in that same year was around $4448 billion. There is the growing © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8_7

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fiscal crisis of Empire. Before the War on Terror, in January 2001, the Congressional Budget Office was predicting budget surpluses into the future. After a decade of tax cuts and two wars, the budget surplus of $2 trillion turned into an annual deficit of $12 trillion. The War on Terror and tax cuts turned the United States into a credit risk, put pressure on the dollar and cramped other forms of government spending. Empire comes at a huge price. The United States is running up against the fiscal limits of Empire. Some deny these limits. Defense spending is sacrosanct for many in Congress. The real costs are often hidden by off-the-book accounting and passing the costs on to future generations in the form of borrowing now and paying later. The costs of Empire are unrelated to the threats we face. Costs increase despite, not because of, the threat levels. A vast, global and expensive military presence has to be paid for in blood as well as gold. The military expenditures skew the economic trajectory and lessen the ability of the federal government to build, innovate and educate. Defense spending, with its many supporters, bears down on the federal budget as a huge weight, forcing expenditure cuts onto the much smaller programs, especially the domestic discretionary spending that accounts for only around 12 percent of all federal spending. Programs that feed hungry kids are cut while bombers and rockets continue to be purchased. The USS Gerald R. Ford, introduced in 2017, cost close to $13 billion, part of a program to replace older carriers, with a conservative cost of $37 billion. Even the mid-life overhaul of one of these older Nimitz class carriers, USS George Washington, cost $3 billion in 2016. The US reigns supreme in military spending as it slides down the table of economic competitiveness, educational access, infrastructure spending and the quality and equity of its social programs. The imperial posture is not only a huge cost but also a major definer of national goals. The most obvious is the tendency to militarize issues. Equipped with the world’s largest hammer, the United States too often sees the world’s problems as nails to be battered down. Not all problems are nails, and not all nails need hammering. The basic flaw of Empire is the tendency to military intervention. The invasion of Iraq was a disaster, but it was simply one of the more inept in a long line of military engagements and interventions since the Korean War. Empire is a major structural fault in the contemporary United States that makes the country vulnerable to costly foreign engagements. US power is not only projected, but it is also transformed and often undermined by these engagements. The invasion of Iraq did not make the

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United States any safer; it did not destroy our enemies and it did little to offset staunch anti-American sentiment in the Muslim world and beyond. The Iraq invasions made the United States more vulnerable, less safe, and proved a fertile recruiting ground for anti-US terrorists. The war revealed in the most dramatic of fashions the risks of Empire and the consequent dangers of foreign military interventions. Empire is inherently risky: it comes with a high price. Not all interventions can be easy and swift like the Grenada invasion of 1983 or the Persian Gulf War of 1991. Given its inherent dangers, why is there continued support for Empire? There is, of course, the insatiable appetite of the military-industrial-security complex. When hard material interests can be wrapped up in the warm blanket of patriotism, these interests can be secured and protected. The complex invokes the safety and standing of the nation while raking in the government contracts. And the threats, real and imagined, are continually ratcheted upwards. It was once the Soviet threat; now it is the terrorist threat. The average US citizen has a much greater risk of dying in an auto accident than in a terrorist incident. In 2001 42,197 people died in auto accidents in the United States, which is equivalent to the death toll in the World Trade Center disaster, each and every month of the year. Yet we do not have a national debate about road safety anywhere close to the terrorist threat. A sober assessment of the costs and risks would reveal a very different world represented by the military-industrial-security complex. The driver in the lane next to me poses a greater risk than an Al Qaeda terrorist. Anxiety is generated and specific threats are inflated because of the simple fact that jobs and careers, money, and profit in substantial numbers depend on a constant narrative of never-ending existential threats to the republic. There is also the simple fact that imperial posture is easy to sustain because it seems to come at such a modest price for the majority of the US population. There is no national sacrifice. There is no draft because with an all-volunteer military, we subcontract the duties of citizenship to paid professionals. Military service is a minority occupation. Citizens have not been taxed to pay for recent imperial engagements. Empire seems to come at so little direct and obvious cost to the average American, and so the interventions can more easily garner support or at the very least fail to ignite unrest and civil disobedience. In order to sustain Empire, the real costs are hidden, deflected, and delayed. Passing the costs onto a professional military, reducing much-needed forms of public investment, racking up the deficit, and deferring the costs to subsequent generations

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all help to sustain Empire. Moreover, declaring war and invoking support for the troops also tend to consign critics to a marginal place that is too easily described as un-American, unpatriotic, and hence illegitimate. The imperial strategy waxes and wanes as failures lead to retrenchment and successes stimulate expansion. After the Vietnam War there was some withdrawal. A defeated nation was also a divided nation. The scars of the Vietnam War, still not fully healed, were salved during the war against Iraq over its invasion of Kuwait. The stunning success encouraged the 2000–2008 Bush administration’s more expansive role for the United States in an invasion of Iraq. Immediately following the quagmire in Afghanistan, there was talk again of contraction. Michael Mazarr, a professor at the US National War College, writes of the strategic insolvency of US foreign policy and predicts increasing resistance to Empire around the world and looming economic deficits. Joseph Parent and Paul MacDonald write eloquently of the wisdom of retrenchment, the virtues of restraint, resisting the myths of Empire, and pursuing a humbler foreign policy that will neither cause global instability nor precipitate national decline. In fact, they argue that a “retrenchment dividend” could reinvigorate a sluggish national economy. Richard Haass writes of the need to distinguish between wars of choice and wars of necessity. Wars of choice, such as Iraq’s, should be avoided, while wars of necessity should be about clearly definable crimes against humanity. And even in such cases, United States involvement should only be countenanced when large numbers of people are threatened, and when there is an obvious solution, international cooperation, and limited costs. After the fiasco of Iraq and Afghanistan, the United States now proclaims a suitably subdued foreign policy.2 But will that survive the more expansionist role constantly pushed by the giant military-industrial-security complex? Eisenhower warned his fellow Americans as far back as 1961 of the danger to the nation of building a huge military and a vast armaments industry. Militarism has both entered the bloodstream of US political and economic life and at the same time disappeared from the critical gaze and ordinary experience of most Americans. The imperial posture is so divorced from the immediate lives of most Americans that they rarely question its existence. And while criticisms of big government become the standard political fare, there is no parallel criticism of big military, the very embodiment of big government. The military-industrial-security complex is very costly to support and displaces much-needed investment in domestic infrastructure, social welfare, job training, and, in general,

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leads to weakening of the nation’s global competitiveness. Big structural flaws require big vision to both see them and transcend them. It is time for Americans to reconsider their commitment to Empire and its attendant massive military interventionism. US imperialism has reached its limits. We are in an era of imperial overstretching, when military spending muscles out much-needed government investments and makes us vulnerable to fiascos. For every “success” such as the Gulf War, there is also the “failure” of an invasion of Iraq. It is time to stop, reconsider, and move to a more multilateral, smaller role in policing the world. Empire itself is just too expensive and too dangerous. Other flaws emanate from the imperial posture. Military spending means less spending on aging airports and crumbling bridges. Imperial overstretch is paid for by domestic underspend. And in this regard, there is a connection between Empire and the underfunding of domestic infrastructure, which ultimately leads to events such as the flooding of New Orleans during Hurricane Katrina. Even the response to COVID was infected by the imperial posture. Money for health supplies allocated to the Pentagon by the Congress was diverted to defense contractors.3 The United States has imperial fatigue. Trump was elected in 2016, in part to put an end to the constant engagement of US troops across the globe. In a speech he spoke of ending endless wars. There is growing distaste with an establishment that had predicted that Hussein had a smoking gun, that the Iraqi people would welcome US troops, that Afghanistan could be won, and peace brought to the Middle East. Small engagements became unwinnable wars that never seemed to end. John Mearsheimer and Stephen Walt argue that the United States should abandon this permanent global military posture and instead focus on maintaining US dominance in the Western Hemisphere and resist, with strategic alliances, the rise of potential hegemons elsewhere. It is a form of hedging against rising hegemons without a vast global permanent military presence. The United States should, so this argument goes, aim to block the rise of potential hegemons, and here everyone means China, with the help of allies only becoming involved if US interests are directly involved and challenged. Offshore balancing is not a retreat from Empire but what its proponents consider a more effective means to maintain US hegemony. The strategy entails balancing against the possibility of regional hegemons emerging that could threaten the United States. A more radical grand strategy of restraint has been proposed. The broad contours of the argument are that the US faces limited threats because of its geographical

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position, so international alliances are not needed, and the military should be drastically downsized. In effect, it is a call for a foreign policy unfettered from Empire.4 The proponents of restraint argue that extensive alliances come with real costs of entanglement and possibility of entrapment, that pursuit of primacy is too costly and not all that effective in reducing arms proliferation or encouraging democracy. After almost two decades of futile wars, the idea of pursuing a strategy of restraint appeals to more people in the United States. But it will take more than sophisticated, even correct, arguments to shift the grand strategy of the United States toward a strategy of restraint. Like a giant oil tanker ploughing through the oceans, US policy cannot change direction easily or quickly. There is too much momentum. And to shift metaphors: too many large and powerful appetites feeding at the trough of Empire. Yet a near-future shift is still possible. Decades of failed wars have moved public opinion toward a willingness to countenance a profound shift in US geopolitical strategy, which since the 1950s has had a life of its own separated from popular public opinion, subject to debate only within the political elites. The necessity of a retreat from Empire is the single biggest lesson from the stress test of the War on Terror and the invasion of Iraq. This retreat need not be an isolationism or a rejection of a world role for the United States, but a call for reduced military spending, a more carefully crafted foreign policy that relies less on military power and more on the greater use of regional alliances and multilateral operations. The heavy burden of global policing needs to be lifted from the shoulders of the United States. The costs of Empire are the country’s biggest, deepest stress fractures.

Climate Change Climate change is a reality. Hurricane Katrina was an early warning of the new normal of increased risks from more extreme events. With sea surface temperatures rising there is a greater probability of larger more destructive hurricanes along the Atlantic Seaboard and Gulf coastline. The growing numbers of storms are not so much “natural” disasters, as events precipitated by human induced climate change. As average temperatures climb on the sea and land. We are moving into an era of more damaging storms, larger wildfires, longer droughts, and more severe floods. While individual cities and municipalities are responding in often imaginative and innovative ways, the national response is in too large a part shaped by hyper-partisan politics and climate change denial. While individual states

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and cities face the challenge, the national response has been weak and limited. National policies for climate change mitigation and adaptation are nowhere near enough to meet the increased risks. The United States is not alone in facing the impacts of climate change on weather patterns, it is of global concern and needs global solutions. However, the US lags behind. There is the triumphalist American view of the natural environment. For most of the life of the Republic the overwhelming emphasis was on defeating nature, subduing it, turning it into a resource, and treating it as a commodity. Nature was an inert receptacle for wishes and desires rather than a place of potential risk and possible hazard. Katrina showed the dangers of this mind-set. When you locate a city below sea level at the mouth of the giant river in a hurricane zone, you are increasing the level of risk. And when you reduce the natural vegetation that protects the coast and build a canal that acts as a hurricane superhighway, you are magnifying the risks. Hurricane Katrina revealed the inherent dangers of ignoring the natural world. In order to deal with climate change perhaps a less triumphalist view of the humannature dialectic is more appropriate. Then there is the resistance to the basic science of climate change. Climate change denial is found around the world, but in the United States it reaches higher up the political hierarchy with the backing of powerful politicians long in the pocket of oil and gas interests. The United States has some of the best climate scientists as well as some of the most highly placed climate change deniers. The paradox deepens as the risks mount. The impacts of climate change pose an existential threat. The failure to mitigate and adapt to climate change are perhaps the greatest risks that confront the Republic. Katrina was just a taste of things to come.

Infrastructure Deficit The United States is facing an infrastructure deficit as our levees, roads and bridges age, and are neither renewed nor maintained. The result is a growing risk of infrastructural collapse that was dramatically revealed by Hurricane Katrina. When you fail to build the levees properly or maintain them to a safe standard, then the elevated risks make a disaster almost unavoidable. The flooding of New Orleans was not a natural disaster; it was a human-made catastrophe as badly constructed and poorly maintained levees simply collapsed. The collapsing of the levee walls dramatically highlighted the dangers of ignoring, delaying, and underfunding vital public infrastructure. The infrastructure deficit is made

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worse by climate change that raises the risk of catastrophic events. We need better levees, power grids, bridges and dams. We need other necessary infrastructure to improve our lives and strengthen our economy. The infrastructure deficit continues to grow generating new hazards and increased risk just as climate change continues to unfold raising the probability of serious storm events, major fires, flooding, and drought. Katrina underscored the cost of ignoring climate change and underfunding infrastructure. A combination of one or both of these constitute continuing stress fractures that threaten our cities, communities and citizens. It is a stress that will only get worse unless climate change mitigation and adaptation is widely addressed, and infrastructure improvement becomes a greater priority than tax cuts or aircraft carriers.

The Enshrinement of Homeownership The financial crisis revealed a number of flaws especially the dangers of a housing policy devoted almost entirely to encouraging and extending homeownership. Owning a home became the “American Dream” and the term “dream” is appropriate since it also entails a sense of fantasy. What was lost in all the hype was that homeownership, for most people, involves a huge debt encumbrance, a heavy indebtedness for the vast majority. The risks of this giant credit burden were downplayed. It is only when the prices drop, and the confidence vanishes that the underlying reality of homeownership becomes apparent. The uncritical commitment to homeownership is promoted and defended by numerous interests who profit from the building, buying, selling, and mortgaging of homes. Homeownership has its place but not as the only form of housing to be protected, subsidized, and promoted. When homeownership is pushed further down the income scale then the risks are heightened. The answer is to make people more aware of the risks, which is not difficult to do in the wake of the crisis, but also to stop subsidizing homeownership. Eliminating all tax relief on mortgage interest and introducing, modest at first, capital gains taxes on profits from selling homes will put homeownership on par with rental housing. Currently, we subsidize homeowners to the detriment of renters. This support of homeownership is also one of the more regressive social policies, befitting as it does both absolutely and relatively the higher-income households. The financial crisis revealed the structural flaw of the mindless promotion and generous subsidization of homeownership.

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The Neoliberal State: Deregulation and Regulatory Capture The financial crisis and the Gulf oil spill both revealed, in their different ways, the risk of an overeager deregulation and of regulatory capture. Reassessing the rules that the government uses to regulate private industry should be a common practice. Regulations need to be regularly assessed as old rules may become embedded especially as new and different realities unfold. And there is always the danger of a bureaucratic inertia that can ossify and calcify. Bureaucracies have an inbuilt tendency to extend their reach and their size. So, yes, a critical gaze at government regulations is vital to good governance and ensuring dynamic markets. However, the deregulation of neoliberalism is in effect a reregulation that helps big business more than small businesses, workers, and, often, consumers. The growing concentration of power in a few companies in vital sectors of the economy tends to encourage this form of reregulation. We need only look at the oligopolistic power of Apple, Google, Facebook, and Apple to see the power of large dominant corporations to influence the regulatory regimes. The steady drift of deregulation at a time of greater risk is the recipe for the disasters such as the financial meltdown and Gulf Oil spill. The financial crisis owes its origins to the deregulation of the financial sector coupled with the endless encouragement of homeownership that turned mortgages from loans to financial products traded along a long chain from originators to banks and investors around the world. Mortgage-backed securities became one more Wall Street product to be bought and sold, traded, and hedged. The risks were increasing just as the regulations were weakening. Moral hazard allowed the large institutions to pocket the gains of high risk but to offload the costs. Regulatory capture meant that the institutions designed to protect us did not do their job. Risks were discounted, profits were privatized, and costs were socialized. The Gulf oil spill highlighted the impacts of regulatory capture in an area of high risk. We are now in a world of permanently tough oil where the risks escalate as drilling goes deeper, further offshore, and into more inhospitable territory. We are at the very edge of our technical ability and often beyond acceptable safety margins. The brute reality is that we can still get oil, whether drilling in the deep in the ocean, unlocking it from the tight embrace of Alberta tar sands, or cracking it open from shale

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formations, but the costs are increasing and the risks of some form of environmental disasters are escalating. The disaster of the Gulf oil spill resulted from a barely regulated industry involved in high-risk endeavors. Gulf oil drilling is a textbook example of regulatory capture. In a world of rising risk and reduced oversight, a disaster is always waiting to happen.

The Health of the United States COVID-19 swept around the world. But the United States that had some of the highest death rates for any rich country in the world. Our near neighbor, Canada had a death rate roughly a third of the United States. According to the well-respected Johns Hopkins Coronavirus Resource Center, while the US death rate was 151 per 100,000 population, the corresponding figure was 124 in France, 84 in Ireland, 58 in Canada and 13 in Finland. Surely, there can be no stress test that is so revealing about the state of health in the United States as a health system that provides the greatest coverage to the affluent and employed and minimal care for the lower income and unemployed. The public health system meanwhile is grossly underfunded. The federal public health establishment was rendered ineffective because of fragmentation of powers and the influence of partisan political appointees. The United States response was a disgrace that revealed the poor health of the nation.

Unequal and Divided In a recent book, Robert Putnam and Shaylyn Romney Grant tell the story of the United States from 1870 to the present day. In the beginning of this era there were marked and growing inequalities. Then there was slow steady increase in equality and commitment to community. Especially after the New Deal. inequality declined with a growing commitment to civic responsibilities. Then, since the 1960s things reversed. Inequality widened and self-interest became enshrined. Political polarization increased to almost dysfunctional levels of governance.5 The five events discussed in the book take place against the broader trends in this unraveling of community. It was revealed, for example, in the state and federal response to Katina. The government response to the drowned city was a sad testimony to the lack of commitment at all levels of government to the most vulnerable. Hurricane Katrina exposed the limited claims that

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the weakest in the United States can ask of their government. As thousands were left stranded in the city the inequalities of class and race were clearly revealed in the people left behind. The laissez-faire attitude to protecting our most vulnerable were revealed for what they are: harmful, dangerous, and ultimately disastrous. The federal response to the financial crisis was to bail out the bankers and financial institutions while close to 8 million households were evicted and millions more were made unemployed. No one was charged and soon after, Wall Street was back to usual, privatizing profits and always looking to socialize the costs. During the pandemic, the federal commitment to the stock markets was unwavering and relentless. Meanwhile, muchneeded payments to the unemployed soon evaporated. The higher rates of infection and death due to COVID-19 among the poor, the most vulnerable, and racial and ethnic minorities was like an X-ray, that provided a stark image of the underlying structural inequalities of US society. Before I left the UK in 1990 to live in the United States, some friends and colleagues held a party for me. One of them, who has spent considerable time in the United States said, “Things will work out well, but remember, do not get poor, do not get Black and do not get ill.” I thought he was only joking.

A System Under Stress The five events, collectively, also reveal systemic fractures that spider web across the political landscapes and public discourses in contemporary United States. The cracks go deep. The first is that, in all cases, risks were undercounted: whether it be in the blank check given to an administration in the wake of 9/11, the lack of proper preparedness for hurricane damage in New Orleans and along the Gulf coast, the deregulation of the financial sector, the lax oversight of the oil industries involved in deep-sea drilling, or the too rosy assumptions about the impact of COVID-19. Discounting risk is perhaps innate to a successful economy. The dynamism of the United States is built upon taking risks. Risk-taking has its uses, but in a complex ever-changing world, risk assessment needs to be undertaken much more seriously. Caution in the face of uncertainty is not cowardice but good sense. There is also a clear need to have a more effective pricing of risks and a fuller discussion of who benefits and who pays for the risks. We need a full cost–benefit analysis of the public obligation to private risks as

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part of broader discussion of the public and private apportionment of the costs and benefits of risk. In the deregulated world of risky behavior by giant companies, while profits are always privatized, costs are invariably socialized. Second, matters were made worse because just as risks increased, the oversight of these risks was reduced. There was cognitive capture as well as regulatory capture. Declaring the War on Terror suspended, at least for a while, full and honest discussion of the costs of war. Patriotic fervor replaced sober analysis. Economic development along the Louisiana coastline was used to trump environmental regulation and led to the continued destruction of the wetlands and the creation of hurricane superhighways. The financial sector lobbied successfully that deregulation was necessary to make it competitive and profitable. In the risky world of global financing and the hazardous world of deep-sea drilling, private companies achieved regulatory capture of the government agencies supposedly overseeing them. The lack of proper accountability of the healthcare industry that has allowed ballooning of costs and profits yet limited gains in public health. In all these cases, risks were increasing as oversight was declining. The five disasters emerge in the yawning space between lack of oversight and rising risk. Actors were all operating in the widening chasm between rising risks and lax oversight. A space was created that allowed risks to be deflected, discounted, and ignored. Third, each of the cases revealed deeply flawed metanarratives. These are the big stories that are used to justify but also to marginalize or stifle debate. They have achieved discursive capture. In the case of the Iraq War, calls for patriotic support for the troops delayed effective criticisms of a flawed and dangerous strategy. In the case of New Orleans, proper environment management was continually undercut by the argument that economic development was paramount. The financial crisis was, in part, a result of the uncritical promotion of homeownership, despite the risks, and rampant financial deregulation, again despite the risks. Although in this case “because of the risk” is more appropriate since the bankers knew that moral hazard would ensure that higher risk meant more profits while the costs would be borne by the general public. The Gulf oil spill originated in the belief that the problems of energy supply in the United States can be met by more drilling or fracking for oil. COVID-19 was brushed off as little more than influenza by too many in positions of power. The five disasters revealed the flaws of the dominant political mind-set.

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Fourth, there is an element of magical thinking that the verities of the current political philosophy of neoliberalism are the answer to our myriad and multifaceted problems. This is cognitive capture, the deep capture of US political discourse. Risks can be more easily discounted when simplistic arguments are employed: making America safe and strong, creating more jobs, promoting homeownership, and unleashing private industry from the shackles of government regulations. It should come as no surprise at a time of growing uncertainty, with risks increasing, that the ideological debate becomes simpler. Complex issues are headlined as “support the troops,” “jobs, jobs, jobs,” “drill baby drill,” “government is the problem,” or “it will soon disappear” are easy to present, represent, and support. The arguments underlying some of these headlines have some merit, but they are used invariably not to stimulate critical thinking but to choke it off. The paradox of the contemporary moment is that, just as religious fundamentalism arises during times of rapid change and uncertainty, political philosophies and corresponding public policies become suitably simplistic just as the issues became more complex, less amenable to the simple solution. Let us take just one example. Government regulation may be cumbersome and can limit economic growth, but it can also enforce safety standards and protect the environment. It all depends on the specific case in point. In some cases, deregulation may work; in others it may be inappropriate. In a complex world of accelerating change, we need subtle and adaptable policies and not the simplistic sloganeering and the single, unchanging response. Simplistic political philosophies and clichéd policy responses emerge just as their ability to meet the challenge shrinks. When the argument becomes reduced to “government is the problem,” or “all deregulation is good,” or “private health care is best,” then we are in a theocracy of ideas untouched by empirical reality. What we need is not simple slogans but more complex narratives. Rather than a false debate between small or big government we need to be arguing for smart government. The disasters were heightened and worsened because they unfolded again a landscape of discounting of risks and the deregulation of oversight of risky enterprises, unchallenged metanarratives in which complex realities are subject to the cognitive and discursive capture of private interests, the magical thinking of neoliberalism, and the deep capture of political discourse by simplistic ideologies. The United States is a resilient society, but its resilience depends on its openness to new ideas not to its imprisonment by old ones. The five

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disasters reveal many things but perhaps the most important is that in a complex world we need our governing ideas to be connected to current reality not past ideologies or the current obsessions of hyper partisanship. The United States is made “more perfect” when we develop policies that are based on an unblinking gaze at the world as it is rather than an imagined world of simple eternal verities and that are crafted more for the general good than for the private gain of the privileged few.

Notes 1. https://www.dmdc.osd.mil/appj/dwp/dwp_reports.jsp. 2. McHugh, J., & Odierno, R. T. (2012, October 17). Ever vigilant and prepared, Army ready for changing world. The Washington Post, p. H1. Mazarr, M. (2012). The risks of ignoring strategic insolvency. The Washington Quarterly, 35, 7–22. Parent, J. P., & MacDonald, P. K. (2011). The wisdom of retrenchment. Foreign Affairs, 90, 32–47. Haass, R. (2009). War of necessity, war of choice: A memoir of two Iraq Wars. Simon and Schuster. 3. Gregg, A., & Torbati, Y. (2020). Pentagon used taxpayer money meant for masks and swabs to make jet engine parts and body armor. The Washington Post. https://tinyurl.com/y65ar9rk. 4. Mearsheimer, J., & Walt, S. M. (2016). The case for offshore balancing. Foreign Affairs, 95, 70–83. Thrall, A. T., & Friedman, B. H. (Eds.). (2018). U.S. grand strategy in the 21st century: The case for restraint. Routledge. 5. Putnam, R. D., & Garrett, S. R. (2020). The upswing: How America came together a century ago and how we can do it again. Simon and Schuster.

Index

A Abu Ghraib, 22 Afghanistan, 7, 12, 14–16, 23, 24, 26, 30, 32, 170, 171 AIG, 113–115 Alaska, 79, 134 Al Qaeda, 15–18, 23, 24, 169 Alternative Mortgage Transaction Parity Act, 1992, 107 American Airlines Flight 11, 15 Flight 77, 15 American Anti-Imperialist League, 11 American Bankers Association, 93 American Dream, 90, 91, 118, 122, 152, 174 American Petroleum Industry, 131 American Society of Civil Engineers (ASCE), 56, 77 Arizona, 98, 111 Asia, 23, 145 Atlanta, 71 Atlantic Ocean, 83

B Baath party, 21 Baghdad, 15, 20, 29 Bahama Banks, 37, 46 Baltimore, 42, 107, 109, 110, 149 Bank of England, 117 Barings bank, 104 Bear Stearns, 87, 112, 124 Bermuda, 47 Blankfein, Lloyd, 88, 101 blowout preventer (BOP), 135 Bolivia, 146 BP Gulf oil spill, 175, 176, 178 John Browne, 134 safety record, 134 Brazil, 146, 155 Bremer, Paul L., 21, 22, 24, 28 Britain, 104, 134 Brown, Michael, 3, 60, 64–66 Bureau of Ocean Energy Management, Regulation and Enforcement, 137 Bush, George W., 3, 7, 19, 51, 60, 65–67, 89, 101, 157, 170

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. R. Short, Stress Testing the USA, https://doi.org/10.1007/978-3-030-65999-8

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INDEX

Bush, G.H.W., 8, 15, 17, 18

C California, 19, 79, 80, 111, 146, 159 Cambodia, 25 Canada, 147, 176 Capital City Mortgage Corporation, 109 Caribbean, 42, 46, 47, 49, 50, 69, 78, 80, 81, 83 Carter, Jimmy, 4, 14 Carter Doctrine, 15 ‘malaise’ speech, 4 Case, Anne, 147, 148 Caspian Sea, 134 Center for Disease Control (CDC), 148–150, 162 Central Intelligence Agency (CIA), 9, 17–19 Chalabi, Ahmed, 18–21 Chandrasekaran, Rajiv, 21, 26 Cheney, Richard, 7, 17, 18, 30 Chicago, 42, 43 Chile, 146, 155 China, 10, 33, 56, 129, 130, 143–146, 171 Cioffii, Ralph, 87 Citigroup, 100, 101, 110, 117 Civil Rights Act, 1964, 98 Climate change, 38, 39, 50, 76, 77, 79, 81, 86, 139, 156, 172–174 Clinton, William, 65, 122 Clinton administration, 132, 154 Coalition Provisional Authority (CPA), 21, 22, 24, 26 Coast Guard, 64, 135 cognitive capture, 121, 122, 178, 179 Cold War, 11–13, 98 collaborative elites, 17, 23 Collaterized Debt Obligation (CDO), 106–109, 112–114

triple A rating, 109, 113 Community Reinvestment Act, 1977, 95 Comptroller of Currency, 110 Congressional Budget Office, 28, 168 Costa Rica, 147 Countrywide Financial Corporation, 88 COVID-19, 144–146, 150, 152, 162, 163, 176–178 credit default swap, 113, 117 cult of individualism, 153 D deaths of despair, 5 Deaton, Angus, 147, 148 Deepwater Horizon, 2, 130, 135, 139, 140 Deep Water Royalty Relief Act, 1995, 133 Denmark, 147 Department of Commerce, 91 Department of Defense (DOD), 9, 12, 19, 24, 62, 63, 167 Department of Energy, 63 Department of Health and Human Services, 64 Department of Housing and Urban Development (HUD), 95 Department of Transport, 63 Depository Institutions Deregulation and Monetary Control Act, 1980, 103, 107 deregulation, 5, 90, 96, 98, 100, 101, 103–105, 114, 137, 175, 179 financial deregulation, 100, 108, 175, 177, 178 Detroit car industry, 129 Disaster Relief Act, 1974, 61 discursive capture, 178, 179 Dodd-Frank Act, 2010, 121 Dominican Republic, 25

INDEX

Dow Jones Industrial Average, 2 E Egypt, 128 Eisenhower, Dwight, 11, 12, 28, 31, 170 farewell speech, 12, 28 Emergency Economic Stabilization Act, 2008, 114 Empire, 8–13, 15, 16, 18, 23–33, 55, 60, 61, 66–68, 72, 78, 96, 99, 167–172 Enlightenment, 4, 156 Europe, 4, 5, 11, 56, 96, 99, 150–152, 156, 162, 163 F Fannie Mae, 92, 93, 95, 112, 120 Federal Deposit Insurance Corporation (FDIC), 102 Federal Emergency Management Agency (FEMA) Incident of National Significance, 59, 62 Interagency Incident Management Group, 59, 62 Principal Federal Officer, 62, 63 Federal Housing Administration (FHA), 92, 95, 109, 120 Federal Reserve, 104, 110, 112, 114 Finance Capitalism (Hilferding), 100 Finland, 176 Fitch, 108 Florida, 37, 49, 50, 60, 81, 111, 161 Ford, Gerald, 18, 168 Forest Service, 64, 80 France Paris, 104 Freddie Mac, 93, 95, 112, 120 free trade, 99, 154 Friedman, Milton, 98

183

G Garn–St, Germain Depository Institutions Act, 1982, 103 Germany, 9, 96, 147, 151, 163 gerrymandering, 160, 161 GI Bill, 92 Glass-Steagall Act, 1933, 102, 103 Goldwater, Barry, 98 Government Accountability Office (GAO), 63 government-sponsored enterprise (GSE), 93 Gramm-Leach-Bailey Act, 1999, 103 Great Depression, 3, 96, 102 Great Recession, 2, 87, 96, 102, 104, 121–124, 152 Greece, 9, 10 Grenada, 3, 25 US invasion, 20, 24, 169 Gulf of Mexico, 2, 37, 40, 49, 50, 127, 130, 136, 138 Gulf Coast, 2, 49, 80, 86, 177 Gulf oil spill, 175, 176, 178 Gulf War (Desert Storm), 15, 30, 171 H Hafizullah Amin, 14 Haiti, 25 Halliburton, 136 Hamilton, Alexander, 61 Hayek, Frederick, 98 Hilferding, Rudolf, 100, 102 Home Mortgage Disclosure Act, 1975, 95 homeownership, 90–95, 103, 104, 108, 110, 117–119, 121, 174, 175 financing, 71, 100, 118, 121 promotion, 90–92, 94, 102, 104, 118, 174, 178 Home Owners Loan Corporation (HOLC), 91

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INDEX

Hong Kong, 77, 113 Hoover, Herbert, 91 Housing and Urban Development Act, 1968, 95 Hurricane Betsy, 52, 57 Hurricane Katrina, 1, 37, 39, 45, 46, 51, 54, 60, 63, 64, 72, 78, 171–173, 176 Tropical depression Twelve, 37 hurricanes Andrew, 3, 49, 60 Charley, 46, 60, 80 Elena, 49 global climate change, 46, 76 Isidore, 50 periodicity, 82 sea surface temperatures (SST), 44, 46, 76, 80, 83, 172 Hussein, Saddam, 8, 15, 17, 18, 20, 21, 23, 29, 171

I imperial fatigue, 171 imperialism British, 62, 134 French, 40, 69, 153 US, 8–10, 16, 24, 26, 168, 171 Indonesia, 139 Industrial Revolution, 4, 74 infrastructure deficit, 38, 39, 53, 55–57, 76, 77, 173, 174 Iran, 17 Iraq Iran-Iraq War, 15 Iraqi Army, 19, 22 Iraq War, 25, 28, 29, 178 Ireland, 176 Islam jihad, 14 Muslim, 169 Israel, 17, 128

Italy, 96, 145–147 J Jackson, Joy, 88 Japan, 9, 128, 163 Jefferson Parish, LA, 38 Jefferson, Thomas, 61, 153 Johns Hopkins Coronavirus Resource Center, 176 Johnson, Simon, 101 Joint Chiefs of Staff, 8 JP Morgan Chase, 87, 101, 120 K Kabul, 14 Kansas, 69 Kennan, George, 9 Kenya, 16 Keynes, John Maynard Keynesianism, 97, 99 Keynesianism-New Deal, 97–99 King, Martine Luther, 75 Kissinger Associates, 21 Korea North Korea, 10, 11 Ongjin, 10 Pusan, 10 South Korea, 10, 149 Korean War, 11, 12, 25, 168 Kuwait, 15, 170 Kyrgyzstan, 23 L Laden, Osama bin, 14–16, 24 Las Vegas, 111 Lebanon, 25 Lehman Brothers, 112, 119 Lent, 69, 114 Liverpool, 42 London, 42, 113, 134 Los Angeles Airport, 79

INDEX

Louisiana, 38, 41, 49, 51, 53, 60, 62, 64, 71, 72, 80, 81, 130, 133, 139, 178 Louisiana Purchase, 41

M Macedonia, 25 Macondo Well, 127, 133, 135, 140 Maestri, Walter, 38 magical thinking, 29, 30, 179 Mahdi Army, 22 Maryland, 88, 149, 160 Massachusetts, 72 Mayfield, Max, 37 Mearsheimer, John, 171 meatpacking industry, 162 Medicaid, 55 Medicare, 55 Metropolitan Money Store, 88 Miami, 37 Middle East, 17, 18, 20, 22, 23, 25, 128, 129, 171 Midway, 107 Minerals Management Services (MMS), 131–133, 137 Minneapolis, 55 Mississippi Canyon Block 252, 127 Mississippi river, 40, 43, 50, 55 Mississippi River Commission, 52 Mississippi River Gulf Outlet Canal (MrGO), 51 Moody’s, 108, 109 moral hazard, 113, 119, 175, 178 mortgage-backed securities, 103, 106, 108, 109, 112, 175 mortgages Alt-A, 107, 111, 112 Ninja, 108–110, 121 securitization, 96, 105, 106, 109 subprime, 87, 88, 95, 107–111, 113, 115, 118, 120, 121

185

Moscow, 9 Mozilo, Angelo, 88, 115 Mujahedeen, 14

N National Association of Home Builders, 93 National Association of Real Estate Boards, 91 National City Corporation, 116 National Emergency Plan, 66 National Hurricane Center (NHC), 37, 38, 45, 47 National Response Plan (NRP), 62–64 National Security Act, 9 National Security Council, 9, 10, 157 NSC-68, 10, 11 Nebraska, 162 neoliberalism, 90, 96–99, 103, 121, 122, 153, 175, 179 neoliberal agenda, 98, 99 neoliberal state, 175 New Century Financial, 111 New Deal, 59, 176 New Deal-Keynesianism, 97–99 New Orleans Convention Center, 60, 68, 73 floods, 39, 43, 47, 52, 66, 172 French Quarter, 40, 41, 43, 69 Hurricane Katrina damage, 39, 54, 173 hurricanes, 3, 37–39, 44–50, 52–57, 60, 67, 68, 72, 76–83, 89, 130, 135, 172, 173, 177, 178 Industrial Canal, 53 Lake Pontchartrain, 40, 53 Lakeview, 70 levees, 2, 38, 43, 44, 52–57, 59, 77, 173 London Avenue Canal, 53, 57

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INDEX

Lower Ninth Ward, 38, 53, 70, 78 police force, 71 public finance, 71 pumping stations, 55 17th Street Canal, 38 slavery, 75 Superdome, 60, 73 New York City, 16, 145, 146 North Carolina, 72 O Obama, Barack, 23, 31, 101, 122, 136, 154, 157 Occupational Safety and Health Administration (OSHA), 134 Office of Thrift Supervision, 110 oil tough oil, 127, 130, 131, 134, 135, 137, 175 Organization of Petroleum Exporting Countries (OPEC), 128, 129 P Pacific Ocean, 45 Pakistan, 14 Panama, 25 Paris, 104, 113 Pashtuns, 14, 26 Patriot Act, 16 Pentagon, 8, 13, 15, 171 Persian Gulf, 15, 25 Persian Gulf War, 169 Pew Research Center, 153 Philadelphia, 111 Philippines, 13 Plessy, Homer, 75 PNC Financial Services, 116 Powell, Colin, 18, 19, 30 Powell Doctrine, 30 privatization, 98 Puerto Rico, 50, 78, 81

Q Quebec, 40 R Rasmussen Reports, 5 Reagan, Ronald, 4, 12, 93, 98 inauguration, 4 regulatory capture, 100, 110, 120, 127, 128, 131, 137–140, 175, 176, 178 retrenchment dividend, 170 Rice, Condoleezza, 17–19 Ricks, Thomas, 1 Roosevelt, F.D.R., 91, 96 Rumsfeld, Donald, 8, 13, 17–19, 21, 28 Department of Defense, 19, 20 Office of Special Plans, 18 Rwanda, 26 S Sachs, Goldman, 88, 100–102, 114, 116, 120 Saudi Arabia, 14, 15, 128 Scandinavia, 74 Scotland, 4, 5 Second World War, 9, 11, 90, 92 Securities and Exchange Commission (SEC), 120 Shanksville PA, 15 Shinseki, Eric, 20 Singapore, 77, 104 social safety net, 150, 152 Societe General, 104 Somalia, 13, 25, 162 Soviet Union (USSR), 9, 14, 15, 28 Soviet empire, 12–14 space-time convergence, 145 Stafford Act, 1988, 61, 63 Standard and Poor, 108 stress testing, 3

INDEX

Suarez, Ray, 151 Sunnis, 22 Syria, 17, 23, 32 T Tajikistan, 23 Tajiks, 14 Taliban, 15, 24, 26 Tannin, Matthew, 87–89, 112 Tanzania, 16 Times Picayune, 51, 67 tough oil, 127, 130, 131, 134, 135, 137, 175 Transocean, 135–137 Troubled Asset Relief Program (TARP), 2008, 102, 114, 116 Truman, Harry, 10, 61 Truman Doctrine, 9 U United Airlines Flight 93, 15 Flight 175, 15 United Kingdom (UK), 9, 119, 147, 155, 156, 177 US Army, 9 Army Corps of Engineers, 51, 57, 67, 77 Capitol, 98 civil war, 9, 10, 42, 74 Coast Guard, 64, 135 Congress, 5, 8, 9, 25, 28, 56, 57, 67, 77, 78, 95, 102, 114, 116, 168, 171 Congressional Budget Office, 28, 168 constitution, 62, 64, 66, 74, 75, 160 Department of Defense (DOD), 9, 12, 24, 62, 63, 167

187

Department of Homeland Security (DHS), 59, 60, 62, 64, 67, 68, 78, 85 Electoral College, 161 Environmental Protection Agency (EPA), 51, 63 expansion, 12, 13, 39, 92, 93, 120, 152, 170 Federal Highway Administration, 55 foreign policy, 25, 29, 30, 32, 33, 170, 172 House of Representatives, 160 Justice Department, 120, 137 Medicare, 55 military, 1, 4, 5, 7–13, 16, 17, 20, 22–25, 27–32, 62, 64, 68, 74, 99, 167–172 military-industrial complex, 11, 28, 99 military-industrial-security complex, 11, 13, 33, 169, 170 National Bridge Inventory, 55 National Flood Insurance Program, 49 National War College, 170 oil consumption, 138 oil production, 130 California, 79, 80 Pennsylvania, 15 presidency, 12, 15, 31, 143 Republicans, 8, 11, 17, 21, 22, 25, 64, 93, 101, 121–123, 154, 156, 158, 160 Social Security, 55 Supreme Court, 75, 151, 160 Brown v. Board of Education, 75 Plessy v. Ferguson, 75 Treasury, 101, 112, 114, 116, 120 Uzbekistan, 23

188

INDEX

V Veterans Administration (VA), 92 Vietnam War, 12, 25, 29, 33, 170 Vitter, David, 51 Vulcans, rise of, 17 W Wall Street, 96, 122, 175, 177 Walt, Stephen, 171 War on Crime, 27 War on Drugs, 27 War on Poverty, 27 War on Terror, 1, 2, 7–9, 16, 26–28, 31, 167, 168, 172, 178 Washington, D.C., 15, 64, 116 Washington, George, 78, 168 Watt, James, 131

weapons of mass destruction (WMD), 17–20, 22, 23 Wells Fargo, 107, 116, 120 Western Europe, 97, 99 wetlands, 50, 51, 57, 178 White House, 17, 32, 56, 60, 64, 65, 67, 96 Wolfowitz, Paul, 8, 17, 18, 20 World Trade Center, 8, 15, 16, 66, 169 Wuhan, 144–146 Y Yalu River, 10 Yergin, Daniel, 9 Yom Kippur War, 128 Yugoslavia, 20, 26