Clinton St. Quarterly, Vol. 10 No. 4 | Winter 1988-89 (Twin Cities/Minneapolis-St. Paul) /// Issue 4 of 7 /// Master# 45 of 73

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S T A F F Co-publishers Julie Ristau, Lenny Dee Editorial Board Lenny Dee, Diane Hellekson, David Morris, Julie Ristau, Karen Starr, Charlie Sugnet, Jay Walljasper Pacific Northwest Editor David Milholland Art Direction Kate Hunt, Lenny Dee Design Direction Gail Swanlund Cover Design Connie Gilbert Designers Connie Gilbert, Gail Swanlund, Eric Walljasper, Contributing Artists Lynda J. Barry, Dave Eckdahl, Jill Dooley-Michell, James Loftus, Stuart Mead, Ann Morgan, Frederic Munoz, Kazuaki Sugi, Gail Swanlund Proofreader Ann Laughlin Account Representatives Dale Shifter, Kate Sullivan Typesetting JeZac Typesetting, Pat McCarty Contributing Photographers John Danicic, Gus Gustafson Spiritual Advisor Camille Gage Axe Queen of Space & Time Lynda J. Barry Thanks to thee ACTION, Betsy Brown, Becky Glass, Jennifer Gage, Jim Hare, Sally Hope, Cynthia Huff, Pegatha Hughes, Susan and Jim Lenfestey, Judy McElhatton, Musicmaster, Nicole and Loren Niemi, Judi Ray, Carol Salmon, Kurt Vonnegut, Ruth Weleczki ON THE COVER A Conservative’s Manifesto — Neil Postman A surprising critique of commercial television and other by-products of modern capitalism. Secrets of the Temple— William Greider How a little known institution, The Federal Reserve, determines how much money we will have. B A C K Lynda B. Goode— Lynda J. Barry A humorist’s memoirs of a zany childhood. Clinton Street Gallery— Lynn Gray, Frederic Munoz, James Loftus, Kazuaki Sugi Some of our favorite artists strut their stuff. Christmas Gifts for Chickens — Jim Blashfield What to get your favorite fowl for the I holidays. T H E 28 Information Implosion— Wes Jackson Contrary to what we’ve been told, there is much less information available today than in the past. Atomic Childhood— Gwion The recent leaks at nuclear facilities makes this story about Atomic City, U.S.A, more timely than ever. Graven Images—- Kathleen Coskran A confrontation between a female minister, her philandering husband and the cleaning lady. F U T U R E Teapot Dome is by artist Arne Nyen, who lives on a farm in Maiden Rock, Wisconsin. He had a Northwest Area Foundation one person exhibition at the Minneapolis Institute of Arts. His work is part of First Bank, Dayton Hudson and Prudential Insurance collections. He is represented by Thomas Barry Fine Arts. vol. 10 No. 4 Winter 1988-89 Ad Salesperson wanted by CSQ. Call 338-0782. The Twin Cities edition is published by the Clinton St. Quarterly, 212 3rd Avenue N., Suite 300, Minneapolis, MN 55401 —(612) 338-0782. Unless otherwise noted, all contents copyright 1988 Clinton St. Quarterly. We encourage your comments, articles and art. All material should be accompanied by a self-addressed, stamped envelope. UGH! Another four years. Friends think of distant ports to escape the “kinder, gentler nation,” a former chief of our secret police might install. Most hunker down into private lives, not willing to advocate change when the prospects of success are slim. In part, this gloom is the result of our ahistorical culture. We forget that most American Presidents have been Neanderthals who we wouldn’t let in the front door, not to even mention trusting them with the nation’s future. Our founding fathers were slave holders who thought only male property holders were capable citizens. Most “statesmen” since then have been little better. The supposedly enlightened leaders like Teddy Roosevelt, Woodrow Wilson, and John Kennedy were in reality imperialists with a handsome face. Our ahistorical nature has also kept us from realizing that the last great cultural uprising, the sixties, produced many important changes. In 1964 Lyndon Johnson invaded the Dominican Republic with impunity. Today despite administration desires, enough opposition exists to thwart any out-and-out invasion of Central America. Twenty-five years ago George Wallace stood formidably at the school doors of the University of Alabama, today Jesse Jackson addresses the Alabama state legislature. Twenty-five years ago feminism and environmentalism did not exist in our lexicon. Today the practical implications of both are debated publicly and privately. These social movements came about after the cultural wasteland of the 1950s and in spite of tremendous opposition from mainstream America. From 1920-32 America endured twelve years of Warren Harding, Calvin Coolidge, and Herbert Hoover. Out of that came the most progressive era in American history. The New Deal was not solely a creature of Roosevelt’s imagination. It was inspired by many groups and individuals who had been working diligently over years for social change. Indeed, the term “New Deal” was first heard in Washington in 1923, when Minnesota Senator Henrik Shipstead used it to describe the programs of his radical Farmer- Labor party. Concrete events certainly influence the ebb and flow of our political life. Clearly the Great Depression was an important catalyst sixty years ago. It is also clear that given the ostrich-like behavior of our current leaders, “it’s morning again in America,” will have a limited shelf life. When events force most Americans to get their heads out of the sand, the foundation for progressive change we have been developing will be of critical importance. Keep on keeping on. ★ ★ ★ This completes our first year in the Twin Cities. We’ve gotten t wonderful feedback and input from many of you. If you’ve admired our contribution to the Twin Cities we do encourage you to take out a gift subscription to help spread the word and to sustain our efforts. —Lenny Dee Clinton St. Quarterly—Winter, 1988-89 3

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6 Clinton St. Quarterly—Winter, 19<

A Conservative’s Manifesto: Why capitalism, technology, and television are a threat to our traditional values Evs oe r dy oaegse ehaacsh i tcsoonwq un esrpoer c. i aI nl f ot hr em se iog fh itme epnetrhi aal ins dm .nAi nned tt eh ee ni rt hm ceet hn ot udr ioefs i, n wv ahsei onn t hwea sB troi t issehn dmtahset ei rr enda vt yh,e t ha er tn, tehdeui cr aat ri omnya, l t hs yesnt etmh e. i rT ahde mAi mn i es trri caat onrss ,naonwd df ion ai ltl yd itfhf ee ri r ently. We send our television shows. The method has mu rs ei ocno mo cmc ue nr sd wi t i. t Nh oe ui tth el ors as romf i leisf enaonr dn wa vi itehso uc lta smhubcyh nr iegshi st t; atnhcee .i nIvt ai s b Ral o u s a s o s s t bia o t n h t s h a t p h t l h a e v e a e s s u u r n n a o b n t l e e y v ae e n t r d s f e q ig t u s u i r c o e k n d . a In n o u a A t m fe w e w r h i ya c e a t a ni r s t s e, l h w e a v e p i sp s i h e o a n nl i l n s b h g e o . w a W b . l T h e e h t n o e K“ Wh reu swhicl lhbe uv r ys ayi do uo, ”f ht hees pWo ekset a(sb au tp rme o- esltel yc t rtohni ni ck imn ga no, ft hAi mn keirni gc ai)n, terms of nineteenth-century Realpolitik. Had he been a more cc ao rnesfcui ol us tsundees ns ti so bf oMr anrex ,o nh et hwe owu li dn ghs aov fe treecmh neoml obgeyr .e dH et hma ti gphotl itthi ceanl k t h h e a a e v n p e a r g r e r m a ly s i i p e n s e g . d P o t e n h r a h t n a i p e n s l e e t c G e t o e r r o n b m t a h a c - g c h e n e n e v t t u i u c r n y w d ea f r o v s r e t m s a n s p de o s n . f e B it m r u a t p t e i e f r m i t a h l o e is r m e R u d s w e s e i h a p i n l l e y s ct hoenmt i sneulivnegs ttuor nmi nagk ei n ttoe rar ibTlhei r dt e lWe voirslido nc o suhnot rwy .s , t h e y m a y f i n d One would think, of course, that Europeans would be fully pa wr oabraebol yf wc oh na tf oi su nhda epdp ebnyi n gt h. eA nf adcmt at hnayt a trhe e. TAhmo seer iwc ahno ma reet nh oo td a roef idmo piesr isael ni sdm oius rmtoerl ee vsi us ibotnl e pt rhoagnr ai tmms .i gNh ot ts eeexma c. t Il ys. a Wi d ht ha ta twweh raet awl l ye send is our idea of television. To understand what is meant by the idea of television, one must allow a distinction between a bt ercahi nn oi sl o gt oy at hned ma imn de d. i Lu imk e. At htee cbhrnaoi nl o, gay ti es cthonao lmo geyd i iusma wphhayts itchael aa pp pp aa rraattuuss . i sL ipk ue t .t hTee ml e vi ni sdi o, na ims eeds isuemn t iiasl l ay ut hs ee tsoa mweh itcehc han oplhoygsyi cianl Af emr eenrti cma eadni da , iuns eEdu ri no pdei .f f eBruetn ft owr af yo sr t, yf oyr eda irfsf e, ri et nht aps ubr ep eons etsw, bo a ds ei fd on different suppositions. This essay— which was a lecture given to the Vienna Club, a ge xr opul opr eosf sc oo mn see rovfa tt hi vees eA up sotirni tasn i nb ugs ri ne ea tses r pde eotpaliel . aBnudt at coa dp re omviicdse—a bt iaocnk og rf owuhnadt fios rc ot hnisse dr vi sactui ssms i oann, dt hweh eys sma oy dael rs no cgaope ist ai nl i tsoma aenxdp tl ae nc ha ­ nology are threats to the preservation of traditional values. By Neil Postman DI l leussi gt rna tbi oy nC bo yn nAi en nG iMl boerrgt a n Clinton St. Quarterly—Winter, 1988-89 7

As a visitor in your country—indeed, as one who does not even know your language well enough to use it in these circumstances—I feel obliged to add something to the introduction I have been given. You are entitled to know at the start from what cultural and political perspectives I see the world, since everything I will have to say here reflects a point of view quite likely different from your own. I am what may be called a conservative. This word, of course, is ambiguous, and you may have a different meaning for it from my own. Perhaps it will help us to understand each other if I say that from my point of view, Ronald Reagan is a radical. It is true enough that he continually speaks of the importance of preserving such traditional institutions and beliefs as the family, childhood, the work ethic, self-denial, and religious piety. But in fact President Reagan does not care one way or another whether any of this is preserved. I do not say that he is against preserving tradition; I say only that this is not where his interests lie. You cannot have failed to notice that he is mostly concerned to preserve a free-market economy, to encourage the development of what is new, and to keep America technologically progressive. He is what may be called a free- market extremist. All of which is to say he is devoted to capitalism. A capitalist cannot afford the pleasures of conservatism, and of necessity regards tradition as an obstacle to be overcome. How the idea originated that capitalists are conservative is something of a mystery to me. Perhaps it is explained by nothing more sinister than that capitalists are inclined to wear dark suits and matching ties. In any case, it is fairly easy to document that capitalists have been a force for radical social change since the eighteenth century, especially in the United States. This is a fact that Alexis de Tocqueville noticed when he studied American institutions in the early nineteenth century. “The American lives,” he wrote, “in a land of wonders; everything around him is in constant movement, and every movement seems an advance. Consequently, in his mind the idea of newness is closely linked with that of improvement. Nowhere does The U.S. is in the process of conducting a vast, uncontrolled social experiment which poses the question, Can a society preserve any of its traditional virtues by submitting all of its institutions to the sovereignty of technology? he see any limit placed by nature to human endeavor; in his eyes something that does not exist is just something that has not been tried.” This is the credo of capitalists the world over, and, I might add, is the source of much of the energy and ingenuity that have characterized American culture for almost two hundred years. No people have been more entranced by newness—and particularly technological newness —than Americans. That is why our most important radicals have always been capitalists, especially capitalists who have exploited the possibilities of new technologies. The names that come to mind are Samuel Morse, Alexander Graham Bell,“Thomas Edison, Henry Ford, William Randolph Hearst, Samuel Goldwyn, Henry Luce, Alan Dumont, and Walt Disney, among many others. These capitalistradicals, inflamed by their fascination for new technologies, created the twentieth century. If you are happy about the twentieth century, you have them to thank for it. But as we all know, in every virtue there lurks a contrapuntal vice. I believe Tocqueville had this in mind in the passage I quoted. He meant to praise our ambition and vitality but at the same time to condemn our naivete and rashness. He meant, in particular, to say that a culture that exalts the new for its own sake, that encourages the radical inclination to exploit what is new and is therefore indifferent to the destruction of the old, that such a culture runs a serious risk of becoming trivial and dangerous, especially dangerous to itself. This is exactly what is happening in the United States in the latter part of the twentieth century. In today’s America, the idea of newness not only is linked to the idea of improvement but is the definition of improvement. If anyone should raise the question, What improves the human spirit?, or even the more mundane question, What improves the quality of life?, Americans are apt to offer a simple formulation: That which is new is better, that which is newest is best. The cure for such a stupid philosophy is conservatism. My version, not President Reagan’s. A true conservative, like myself, knows that technology always fosters radical social change. A true conservative also knows that it is useless to pretend that technology will not have its way with a culture. But a conservative recognizes a difference between rape Advertising agencies cannot afford to permit a culture to retain old ideas about work or religion or politics or childhood. and seduction. The rapist cares nothing for his1 victim. The seducer must accommodate himself to the will and temperament of the object of his desires. Indeed, he does not want a victim so much as an accomplice. What I am saying is that technology can rape a culture or be forced to seduce it. The aim of a genuine conservative in a technological age is to control the fury of technology, to make it behave itself, to insist that it accommodate itself to the will and temperament of a people. It is his best hope that through his efforts a modicum of charm may accompany the union of technology and culture. The United States is the most radical society in the world. It is in the process of conducting a vast, uncontrolled social experiment which poses the question, Can a society preserve any of its traditional virtues by submitting all of its institutions to the sovereignty of technology? Those of us who live in America and who are inclined to say “No” are therefore well placed to offer warnings to our European cousins—who are themselves wondering whether or not to participate fully in such an experiment. In order to give focus to my advice, I shall confine myself to the technology of television, which, at the moment, poses the most serious threat to traditional patterns of life in all industrialized nations, including your own. And I hope you will forgive me if I begin by quoting Karl Marx. Marx once wrote, “There is a specter haunting Europe.” The specter he had in mind was the rising up of the proletariat. The specter I have in mind is commercial television. Everywhere one looks in Europe—West Germany, Sweden, France, Holland, Switzerland, Denmark—the ghostly form of commercial television is making its presence felt. That it threatens the foundations of each West European nation ought to be obvious, but, one fears, the possibility has not been sufficiently discussed. In Paris alone there are seven advertiser-supported television stations, and now an eighth one has been installed in three Paris subway stations. It consists of 150 closed- circuit units, each unit carrying thirty minutes of programming: four minutes of news about the subway system, sixteen minutes’ worth of programs, and ten minutes of advertising. The ads cost $7,500 per week for each thirty-second spot. In the understatement of the year, the marketing director of the Paris subway system said, “It’s a way of changing the ambience of the subway station.” Of course, this man has confused cause and effect. If the French require television entertainment when they go from one end of town to the other, then we may say that it is not the ambience of the subway that has changed but the ambience of French culture. In Denmark, which has consistently opposed commercial television, plans have now been completed to allow advertising on the second national television channel, which begins broadcasting in 1988. As is presently the case in Austria, advertising for tobacco and alcohol will be prohibited. Also banned are ads for medicine, banks, political parties, and religious organizations, as well as commercials aimed specifically at young people. The Danes are usually a realistic and clear-headed people. But does anyone believe that the specter of Commercial television will be appeased by such compromises? Perhaps. And perhaps it will be appeased in Austria as well. But if it is not, you can lose very quickly much that you love and admire about your country. What I should like to do, then, is to frighten you by making a series of prophecies about what will occur if Austria allows its television technology to become a free-market commodity. These prophecies are largely based on the experiences of my country, which is the only nation, at present, where commercial interests dominate television. By way of preface, I want to make two points. The first is that in principle, a conservative is not obliged to be opposed to state- controlled broadcasting. One of the best-known American conservatives of this century, Herbert Hoover, our thirty-first President, was appalled at the prospect of opening up broadcasting to commercial interests. In 1923, when he was Secretary of Commerce, he expressed in the most emphatic terms his hope that radio, which he viewed as an instrument of public education, would be kept free of the marketplace. There can be no doubting that were he to see American television today, he would deplore the fact that his advice was ignored. While conservatives are rightly suspicious of state authority and therefore of state-controlled television, they need not be so foolish as to suppose that the state is the only antagonist of freedom of choice, or necessarily the worst. Which leads me to my second point. If one asks the question, Does a state-controlled television system limit freedom of expression and choice?, the answer is, obviously, Yes, it does. But it is extremely naive to believe that a free-market television system does not also limit freedom. In the United States, where television is controlled by advertising revenues, its principal function is, naturally enough, to deliver audiences to advertisers. The more popular a program is, the more money it can charge an advertiser for commercials. What is popular pays and therefore stays; what is in arrears disappears. American television limits freedom of expression and choice because its only criterion of merit and significance is popularity. And this, in turn, means that almost anything that is difficult or serious or goes against the grain of popular prejudices will not be seen. Americans are apt to offer a simple formulation: That which is new is better, that which is newest is best. 8 Clinton St. Quarterly—Winter, 1988-89

What will happen if commercial television takes hold in a serious way in Austria? By serious commercial television, I mean a system that is largely supported by advertising revenues, and that has a minimum of government regulations about what can be broadcast and when. Should anything like this come to Austria, here’s what I predict: number of hours of television broadcasting each day. There is simply too much money at stake to allow any part of the day to go unused. Where there is one fully functioning commercial channel, there will be pressure for others to emerge. When there are two or more, the channels will compete with each other for the audience’s attention, and for advertising money. This will lead to an increase in American-style television programs -fast-paced, visually dynamic programs with an emphasis on interesting images rather than serious content. This means an increase in comedy, car chases, violence, and sexually oriented material. To hold their audiences, state- controlled channels will be forced to compete with commercial-style programming, and will also become similar to American television. This is exactly what has happened to the BBC in England and the Public Broadcast- ting System in America. As audiences come to expect fast-paced, visually exciting programs, they will begin to find issue-oriented public-affairs and news programs dull. To compete with entertainment programs, news and public-affairs programs will become more visual and more personality- oriented. As a result, there will be a decline in the public’s capacity to understand and discuss events and issues in a serious way. Of course, television advertising will draw advertisers away from newspapers and magazines. Some newspapers and magazines will go out of business; others will change their format and style to compete with television for audiences, and to match the style of thought promoted by television. They will become more . picture-oriented and will feature dramatic headlines, celebrities, and sensational stories. Of course, there will be less substantive and complex writing. For some idea of what I mean, I suggest you look at America’s newest, most successful national newspaper, USA Today; you ought also to take note of the fact that one of America’s oldest and most distinguished literary magazines, Harper’s, has found it necessary to substantially reduce the length of its articles and stories in order to accommodate the reduced attention span of its readers. The uses of books will also change. I suspect there will be an erosion of the concept of the common reader, the type of person who gets most of his or her literary experience and information from novels and general non-fiction books. There will almost certainly be an increase in both illiteracy and aliteracy (an aliterate being a person who can read but doesn’t). It has been estimated that in the United States there are now 60 million illiterates, and according to a report from our Librarian of Congress, there may be an equal number of aliterates. In any case, a general impatience with books will develop, especially with books in which language is used with subtlety to express complex ideas. Most likely there will be a decline in readers’ analytical and critical skills. According to the results of standardized tests given in schools, this has been happening in the United States for the past twenty-five years. I suspect concern for history will also decline, to be replaced by a consuming interest in the present. The effect on political life will be devastating. There will be less emphasis on issues, substance, and ideology, an increase in the importance of image and style. Politicians will have greater concern for moment-to-moment shifts in public opinion, less concern for long-range policies. Unless the use of television for political campaigns is stricly prohibited, elections may be decided by which party spends more on television and media consultants. Even if political commercials are prohibited, politicians will appear on entertainment programs and will almost certainly be asked to give testimonials for non-political products such as cars, beer, and breakfast foods. The line between political life and entertainment will blur, and movie stars may be taken seriously as political candidates. Once the population becomes accustomed to spending much of its time watching television —in the United States, the average household has television on about eight hours a day—there will be a decrease in activities outside the home: fewer and smaller gatherings in parks, beer halls, concert halls, and other public places. As street life decreases, there I am a conservative. From my point of view, Ronald Reagan is a radical. How the idea originated that capitalists are conservative is something of a mystery tome. may well be an increase in street crime. Young people will, of course, become disaffected from school and reading. Children’s games are likely to disappear. In fact, it will become important to keep children watching television because they will be a major consumer group. In the United States, children watch 5,000 hours of television before they enter kindergarten and 16,000 hours by high school’s end. Commercial television does not dislike children; it simply cannot afford the idea of childhood. Consumerhood takes precedence. Naturally, family life will be significantly changed. There will be less interaction among family members, certainly less talk between parents and children. Such talk as there is will be noticeably different from what you are now accustomed to. The young will speak of matters that once were confined to adults. Commercial television is a medium that does not segregate its audience, and therefore all segments of the population share the same symbolic world. You may find that in the end the line between adulthood and childhood has been erased entirely. Since Austria already has some television commercials, you have seen how commercials stress the values of youth, how they stress consumption, the immediate gratification of desires, the love of the new, a contempt for what is old. Television screens saturated with commercials promote the Utopian and childish idea that all problems have fast, simple, and technological solutions. You must banish from your mind the naive but commonplace notion that commercials are about products. They are about products in the same sense that the story of Jonah is about the anatomy of whales. Which is to say, they aren’t. They are about values and myths and fantasies. One might even say they form a body of religious literature, a montage of voluminous, visualized sacred texts that provide people with images and stories around which to organize their lives. To give you some idea of exactly how voluminous, I should tell you that the average American will have seen approximately 1 million television commercials, at the rate of a thousand per week, by the age of twenty. By the age of sixty-five, the average American will have seen more than 2 million television commercials. Commercial television adds to the Decalogue several impious commandments, among them that thou shalt have no other gods than consumption, thou shalt despise what is old, thou shalt seek to amuse thyself continuously, and thou shalt avoid complexity like the ten plagues that afflicted Egypt. Perhaps you are thinking that I exaggerate the social and psychic results of the commercialization of television and that, in any case, what has happened in the United States could not happen in Austria. If you are, you overestimate the power of tradition and underestimate the power of technology. To enliven your sense of the forces unleashed by technological change, you need only remind yourself of what the automobile has brought to Austria. Has it not changed the nature of your cities, created the suburbs, poisoned your air and forests, restructured your economy? You must not mislead yourselves by what you know about Austrian culture as of 1987. Austria is still living in the age of Gutenberg. Commercial television attacks such backwardness with astonishing ferocity. For example, at the present time, less than 20 percent of the Austrian population watches television in the evening. A commercial television system will find this situation intolerable. In the United States, about 75 percent of the adult population watches television during evening hours, and broadcasters find even those numbers unsatisfactory. In Austria, such commercials as you have are bunched together so that they do not interfere with the continuity of programs. Such a situation makes no sense in a commercial system. The whole idea is precisely to interrupt the continuity of programs so that one’s thoughts cannot stray too far from considerations of consumership. Indeed, the aim is to obliterate the distinction between a program and a commercial. In Austria, you do not have many advertising agencies, and those you have are small and without great influence. In America, our advertising agencies are among the largest and most powerful corporations in the world. The merger of Doyle, Dane, Bernbach with BBD&O and Needham Harper will provide the new company with the possibility of $5.5 billion in billings each year, and possibly $500 million per year for American network television alone. This is serious money and these are serious radicals. They cannot afford to permit a culture to retain old ideas about work or religion or politics or childhood. And it will not be long before they and their kind show up in Austria. If, like me, you claim allegiance to an authentic conservative philosophy, one that seeks to preserve that which nourishes the spirit, you would be wise to approach all proposals for a free-market television system with extreme caution. Indeed, I will go further than that: it is either hypocrisy or ignorance to argue that the transformation of Austria or any other country from a print-based culture to a television-based culture can leave that country’s traditions intact. Conservatives know this is nonsense, and so they worry. Radicals also know this is nonsense. But they don’t care. Neil Postman is a critic, writer, communications theorist, and professor of communication arts and science at New York University. His sixteen previous books include Amusing Ourselves to Death, Teaching as a Subversive Activity, The Soft Revolution, and The Disappearance of Childhood. This excerpt is from Conscientious Objections just published by Alfred A. Knopf. Ann Morgan is a Twin Cities artist. Designer Connie Gilbert is a regular contributor to the Clinton Street Quarterly. Clinton St. Quarterly— Winter, 1988-89 9

10 Clinton St. Quarterly—Winter, 1988-89

Temple controls everyone’s economic future Catastrophe was general in the farm belt. Thousands of farmers either faced foreclosure on old debts or their banks refused to grant new credit for the approaching growing season. The value of Iowa farmland was decreased by half and small towns withered as the local commerce disappeared. Iowa lost fifty thousand of its citizens. The price of corn, which had been above $3.50 only a few years earlier, fell steadily, headed toward a ruinous low—corn at $1 a bushel. The Middle West and other regions were trapped in an economic phenomenon unfamiliar to all but the most elderly of Americans—deflation. Since World War II, Americans had become accustomed to one constant, rising prices. In the fortyyear upward slope of modern inflation, the only thing that varied was how fast prices were increasing.

In 1985, agriculture and other basic producers of the American economy were engulfed by a crisis of the opposite nature—the persistent, crippling effects of falling prices. On a farm near Unionville, Iowa, a group of distressed farmers gathered in the living room of Clifford and Evelyne Burger to exchange tips on fending off the bank foreclosures, to console one another and to search for answers. The Burgers had been missing debt payments sporadically since 1983; the local bank had just turned down their loan application for spring planting. The Burgers and their friends thought they had found the explanation. Their failure, they decided, was caused by a remote conspiracy of bankers, operating through the Federal Reserve. Mrs. Burger distributed an illustrated pamphlet entitled “Billions for Bankers, Debt for the People,” a polemical tract on the money question that was circulating widely in Iowa and other afflicted farm states. The Federal Reserve, the pamphlet explained, was “a system of Banker- owned Mammon that has usurped the mantle of government, disguised itself as our legitimate government, and set about to pauperize and control our people.” The farmers talked quite familiarly about this conspiracy against them, reciting old names and obscure events from the Federal Reserve’s early history. A web of international bankers had designed the central bank back in 1913 in order to dominate the world; their unseen control extended to grain companies, major conglomerates, the financial markets and the news media. These manipulations, the farmers earnestly explained, were guided by the “ Power 300” and the “Inner Circle” and, ultimately, by the “Zionist Jewish conspiracy.” “The Federal Reserve dictates to Reagan,” said John Sellers, Jr., another young farmer awaiting his foreclosure notice. “Everyone says there is a shortage of money, but it isn’t so. If they wanted more money, they pretty well could print it up. The Federal Reserve is the biggest hoax ever played. Ninety-nine percent of the people think it’s a branch of the government.” Like others, John Sellers was trying to combat the personal depression that accompanied economic failure. “It’s a very gray world and you feel like you’re ninety years old,” he said. “You’re in quicksand and there’s no way out. Many blame themselves. When the hammer finally falls, you look back at the decisions you made and the decisions you could have made and you go through a terrible period of depression, of guilt.” In Iowa as well as other distressed areas, farmers found some solace in the realization that others were failing too, even some of the best farmers among them who had managed most efficiently. Obviously, it could not be their'fault alone. There must be some larger explanation. Some farmers focused their anger on the giant grain-trading companies. Others blamed the strong dollar, which cut into exports. Others, an intense minority with extreme views, resurrected the old conspiracy theories that had surrounded the Federal Reserve Bank’s mysterious powers since its origin. The farmers studied the baffling facts of money creation and the anomalous status of the Federal Reserve—a supremely powerful appointed board that wields as much power as elected officials—and they decided, not illogically, that only a powerful conspiracy could have created such a bizarre arrangement. It was the Rockefellers and the Jews who had plotted to ruin Iowa. It was the “Powers” that, by controlling money creation, had subverted democracy. The belief in distant conspiracy reflected a shocked disappointment with life, political anger mixed with a deep spiritual distress. In desperate times, confused and powerless people were prepared to believe that their lives were held in thrall by a malevolent hierarchy. The farmers in Iowa were like the Catholic monks of medieval Europe who condemned moneylenders. The farmers in Iowa looked at what money was doing to their lives and they saw the hand of the devil. There was one other explanation most victims in Iowa and elsewhere did not wish to face—that the American political system itself had decided their fate. The deflation destroying American farmers and other producers was not imposed by remote conspirators, but by their own government in Washington, with the approval or acquiescence of their own elected representatives. The general calamity of falling prices was not a mistake or a random accident of nature or an evil plot. It was the necessary consequence of the economic logic pursued by those who held legitimate political power in the American system, most particularly the Federal Reserve but with the tacit consent of others. This larger reality was too demoralizing for most victims to accept, even those who understood money and the Federal Reserve’s role in the deflation. It was far easier to believe that their distress resulted from mistakes Or misguided policy and would soon be relieved if only enough Americans understood what was happening. Faced with failure, they preferred to conclude that an evil cabal had engineered their ruined lives, using the dreadful powers of the Federal Reserve to undermine justice and self-government. The political logic that propelled these farmers’ crisis was not secret. Given the choices made in Washington, deflationary destruction was virtually inevitable. The Federal Reserve was determined to drive the rate of inflation lower and lower, regardless of other consequences, and no one of any influence challenged the Fed’s objective. Indeed, it was fully endorsed by both political parties. As a practical matter, in order to stabilize money’s value at zero inflation or as close as possible, some elements in the economy must be forced into negative levels—held in a state of perpetual losses—in order to offset the rising prices that other economic sectors continued to enjoy. The government, especially the Federal Reserve, could not very well acknowledge this unpleasant tradeoff, but it was frankly understood in financial markets. With matter-of- fact directness, E.F. Hutton explained the logic to its investment customers: “To our mind, pockets of deflation and an ad hoc program of bankruptcy containment are as much a part of secular disinflation as are low inflation and declining interest rates. If disinflation in this cycle is to work, there must be losers—those who made or financed wrong debts. These negatives, however, are “ secondary.” “There must be losers.” The losers, as the Hutton newsletter noted, extended far beyond agriculture. They included the workers, managers and owners in many other sectors— real estate, basic commodities,, energy. Labor and basic manufacturing could also be regarded as having matje “wrong bets.” The negative effects of the deflation, however, were not “secondary” pockets, as the brokerage claimed. Taken together, the deflationary losses cut a wide and depressing swath across the American economy, from timber in the Pacific Northwest to the “oil patch” of Texas, Oklahoma and Louisiana, from copper mines and cotton farms in the Southwest to grain states on the northern prairie and industrial cities in the Middle West. With so many accumulated losers, the American economy could not be healthy. The price deflation that unfolded in the middle of the 1980s closely resembled the deflation of the 1 in its selective damage. The sam tims were entrapped by surplus and falling prices in both decades, and their economic predicament likewise was largely ignored—occasionally even applauded—by the rest of the nation. For farmers as well as workers in 12 Clinton St. Quarterly—Winter, 1988-89

certain industries, the Great Depression was already underway in the ’20s—a preview of what everyone would experience after 1929. In both the 1920s and the 1980s, the Federal Reserve was the central engine of control, the economic regulator that imposed these terms. Federal Reserve chairman Paul Volcker’s management of money and the economy during the late ’70s and ’80s followed the pattern set by Benjamin Strong, the New York Fed president who had dominated America’s new central bank during its early decades. Across six decades, Paul Volcker and Benjamin Strong were likeminded men of finance, who shared the same conservative values. Both men assumed the central bank’s first obligation was to protect the banking system from crisis and chaos and they worked strenuously to do so. More important, Volcker and Strong were both absorbed—if not obsessed —by a single-minded conception of economic order. For both of them, economic order was defined, above all else, by the stable value of money, i.e. little or no inflation. To achieve that ideal, the Federal Reserve proceeded in both decades to first induce a brutal recession, a suppression of economic activity that was designed to break an inflationary surge. Just as the twenties opened with the severe recession engineered by the Federal Reserve in 1920-1921, Volcker’s management produced the devastating contraction of 1981-1982. The lever for halting inflation in both cases was a traumatic and unprecedented increase in interest rates, which is essentially the price of money—forcing business activity to subside and surpluses to accumulate. The accompanying economic suffering it was argued, was the necessary prelude to long-lasting prosperity, an era of order and stability in which all could benefit. After each of these recessions, however, in order to preserve stable prices, the central bank did not give free rein to the economy in recovery. The Federal Reserve, instead, managed money and interest rates in such a way that the surpluses caused by the recession remained—surplus labor, surplus grain, surplus oil, surplus goods—and these surpluses continued to suppress prices and wages. For relatively long periods, therefore, Volcker and Strong each succeeded in maintaining an economy free of inflation. Both men were widely admired for this achievement. The maintenance of low inflation, however, required a condition of continuing failure for many. The average price level was prevented from rising because certain prices continued to fall. Through the twenties, farmers never really recovered from Benjamin Strong’s devastating recession of 1920-1921, and farmers did not recover from Paul Volcker’s in the 1980s. Nor did organized labor, nor mines and mills, nor the oil industry and certain other producers. Stable money was, ultimately, an illusion. It was nothing more than a statistical artifice that concealed The deflation destroying American farmers and other producers was not imposed by remote conspirators, but by their own government in Washington. harsh realities. In both eras, the Federal Reserve was celebrated for accomplishing what it took to be its highest purpose, the virtual elimination of inflation. Yet the ideal was mearly an economic abstraction and it was not neutral. It was simply an averaging of gains and losses that produced the comforting illusion of balance. Indeed, the restoration of stable money produced a smug sense of moral satisfaction, in which the “roaring twenties” served as a crude precedent for the “go-go eighties.” Those who succeeded indulged in elaborate fantasies of ostentatious consumption. Those who failed, amid the general prosperity, were blamed for their own mistakes. Farmers and oil producers, it was said, had borrowed excessively in the past, pursuing unrealistic expectations about the future. Their punishment, though regrettable, was justified by their own imprudence. The rationale ignored what had actually transpired: the government itself had drastically and abruptly altered the terms for the future. Its actions put all debtors at a sudden disadvantage, the wise and the unwise alike, with no real opportunity to adjust to the changed circumstances. The default of producers, it was said further, would enhance the efficiency of the nation, as the weak and marginal were weeded out. Deflationary pressures did indeed force producers to cut their costs and eliminate waste, but the central consequence was merely a consolidation of ownership. Farmland in Iowa did not disappear when its value collapsed and the farmer defaulted on his loans. Nor did oil rigs and reserves in Oklahoma or Texas. They were acquired at depressed prices by other, oftentimes larger owners, who could operate profitably in the new environment of deflation because they had more money and hence a lower ratio of debt. Ownership of family farms passed on to large-scale corporate enterprises. Oil reserves held by failing independent producers became the property of their creditors. The ultimate effect of the liquidation in the 1980s, just as in earlier episodes of deflation, was to further concentrate the ownership of wealth. With neither political party prepared to represent them on the money question, farmers and the other victims of deflation protested impotently. Their complaints were often misdirected, and even when they did challenge monetary policy itself, their arguments were deflected by the Federal Reserve’s imposing mystique. Dissent was intimidated by Paul Volcker’s awesome reputation. In February 1985, Paul Volcker— who was appointed to a 4-year term as Federal Reserve Chairman in 1979 by Jimmy Carter and reappointed by Ronald Reagan in 1983—faced a delegation of state legislators from thirteen distressed farm states— Iowa, Nebraska, the Dakotas and others who had traveled to Washington to plead for relief. In the magnificent boardroom of the Federal Reserve, the chairman listened to the farm representatives argue for easier money, for lower interest rates and an end to the price deflation. His response chilled them. “Look,” Volcker said, “your constituents are unhappy, mine aren’t.” The essence of monetary policy, despite the complexities and the aura of scientific decision-making that surrounds it, is always a choice of values. Which economic goals mattered most? What came first? Paul Volcker’s sure-handed management of money had effectively decided the priorities for the nation. Yet the Federal Reserve’s control produced disappointing results in the real economy. Various forecasters during the ’80s kept predicting a revived boom, but it never materialized. The economic expansion remained fitful and fainthearted, performing far below the economy’s potential and below the historic averages for recovery cycles. From the middle of 1984 onward, the economy settled into a jigsaw pattern of uneven advances—weakening one quarter, then resurgent the next, then weakening again. The Federal Reserve eased or restrained in carefully measured steps, averting a recession but also failing to break out of the lackluster pattern. Even the Fed’s own conservative expectations for the economy were disappointed. Over the subsequent twenty-four months, the economy grew in real terms by less than 2.5 percent. The general disappointment was crisply summarized by Fortune magazine in its report on the 1985 performance of the Fortune 500 corporations. Overall sales moved up only 2.8 percent, less than the inflation rate. Profits sank 19.1 percent, the worst performance since the recession year of 1982. Slack demand, a strong From 1982 to 1987, the value of Dow Jones stocks rose by more than 230 percent. Yet real economic growth totaled only 20 percent. dollar, and fierce international competition all hurt. Metals, transportation equipment, textiles and mining fared poorly. Even computers and office equipment fell 6.2 percent. Only 242 companies among the 500 showed profit increases and 70 lost money—a record.... Unable to wring satisfactory returns from their traditional businesses last year, many of the 500 companies put efforts into rearranging their existing resources and buying new ones. They restructured through mergers and acquisitions, stock repurchases and leveraged buy outs.... Yet Volcker stood his ground. When the economy weakened in the spring quarter of 1985 and many forecasters worried aloud about a possible recession, Volcker relented—but only slightly. The Board of Governors agreed on May 17 to reduce the Discount rate by .5 percent. Economic growth picked up somewhat subsequently as interest rates declined and recession was averted. Except for that limited concession, however, Volcker was unyielding. Despite the gathering deflation and the disappointing business activity, he kept interest rates at the same high level and declined to do more to help the struggling economy. ft ensible businessj J men do not pro- duce things they cannot sell and certainly they do not build new factories when they have usable factories standing idle.” The observation by businessman and author George P. Brockway, simple and obvious as it seemed, went to the heart of the matter— the fundamental economic disorder that confronted not just the United States, but the world. The contest of currencies, the political controversies over trade restrictions, were the visible struggles that concealed a much deeper malady, one that was shared by all. The U.S. economy and the world’s were awash in surpluses —an overabundance of available labor, of foodstuffs and raw materials, of manufactured goods. Worldwide, the existing capacity to produce goods far exceeded the aggregate demand for them—a glut of supply. Given that basic dilemma, nations n’aturally’fought over market shares and erected trading barriers to protect their own producers. Unemployment remained high in most industrial nations and prices remained depressed—all because the world could produce more goods than its markets could absorb. The United States was operating far below its capacity, but so were Japan and West Germany and other major producers. The glut was visible in most basic markets: oil and grains, cotton and sugar, steel and copper and other metals. But the excess productive capacity also afflicted many manufactured goods: automobiles and machine tools, personal computers and industrial chemicals, microchips and tape recorders, and many others. The imbalance of supply was, of course, another way of saying that there was inadequate demand. Around the world, there were simply not enough people who had the money to buy all the goods the world’s economies could now produce. The underlying causes of this disorder were deeper than money- economic changes in the world that had been developing for many years. Two decades of global development, led by multinational corporations and financed by bank lending, had greatly enlarged the world’s productive capacity, building new factories where none had existed a generation ago, creating a much larger industrial base for the world. The paradox of the 1980s was that, in a sense, Economist John Maynard Keynes got the last laugh, after all. The American President who came to power focused the debate on improving the “supply side” of the economy. Keynesian “demand side” economics was eclipsed. The Reagan tax cuts, by directing most of the money to investors, would launch a great burst of capital formation, building new factories, developing more supply capacity. Yet the fundamental disorder of the 1980s was essentially the same one that Keynes and the New Deal liberals had identified—there was already too much supply and not enough demand. The Reagan tax cuts, combined with the Fed’s tight money policy, obscured this reality with the anomalous conditions they created. The tax reductions did not produce an investment boom for the very good reason cited by Brockway—why build new factories when you can’t sell the goods produced by the old factories? Instead, the fiscal stimulus from the federal deficits drove a boom in consumption—and a burgeoning of debt, both private and public. But, given the overvalued dollar created by the Fed’s tight money, a huge share of the American consumption was captured by the cheaper-priced imports instead of by American-made goods. The U.S. market was buying the surplus production of other economies and allowing American producers to suffer the consequences of the supply glut. Americans, in effect, were carrying the world—and borrowing the money to do so. The disorder of the eighties— excess supply, inadequate demand and the maldistribution of incomes— was parallel to the underlying conditions that led to the collapse of 1929. There were important differences, including the fact that burgeoning debt in the 1920s did not include huge government deficits and that productivity in the 1980s was much weaker. A similar outcome might yet be avoided in the eighties if governments acted to confront the real economic vulnerabilities, though that seemed unlikely. It would require political leaders not only to abandon the economic orthodoxies that had guided their careers, but also to reconsider the very ideas they had disparaged. The world economy, in short, required a new version of Keynesian economics—but a strategy vastly more complex and far-ranging than the original one. The same basic questions that New Dealers faced in the 1930s were appropriate—how to stimulate demand, how to limit supply. But now answers would have to be devised in terms of global application. The world was no longer divided, as it had been in Keynes’s day, between wealthy industrial nations and colonial territories that provided the raw materials. The U.S. no longer dominated, either with its trade or currency, and the economic vulnerabilities confronting it could not be Clinton St. Quarterly—Winter, 1988-89 13