Editor’s note: Christopher Ketcham wrote this essay before the Occupy Wall Street movement began, and before “the one percent” and “the 99 percent” became buzzwords defining income inequality. After OWS was in full swing, Ketcham wrote in a postscript, “I had little hope that the kids in New York would pull off anything like the growing revolt in Liberty Square and beyond. I am delighted to be proved totally wrong.”
For my daughter’s benefit, so that she might know the enemy better, know what he looks like, where he nests, and when and where to throw eggs at his head, we start the tour at Wall Street. It’s hot. August. We’re sweating like old cheese.
Here are the monuments that matter, I tell her: the offices of Deutsche Bank and Bank of New York Mellon; the JPMorgan Chase tower up the block; around the corner, the AIG building. The structures dwarf us, imposing themselves skyward.
“Linked together like rat warrens, with air-conditioning,” I tell her. “These are dangerous creatures, Léa. Sociopaths.”
She doesn’t know what sociopath means.
“It’s a person who doesn’t care about anybody but himself. Socio, meaning society—you, me, this city, civilization. Patho, like pathogen—carrying and spreading disease.”
Long roll of eyes.
I’m intent on making this a teachable moment for my daughter, who is 15, but I have to quit the vitriol, break it down for her. I have to explain why the tour is important, what it has to do with her, her friends, her generation, the future they will grow up into.
On a smaller scale, I want Léa to understand what New York, my birthplace and home, once beloved to me, is really about. Because I’m convinced that the beating heart of the city today is not its art galleries, its boutiques, its restaurants or bars, its theaters, its museums, nor its miserable remnants in manufacturing, nor its creative types—its writers, dancers, artists, sculptors, thinkers, musicians, or, god forbid, its journalists.
“Here,” I tell her, standing in the canyons of world finance, “is what New York is about. Sociopaths getting really rich while everyone else just sits on their asses and lets it happen.”
The Cancer That Led to Income Inequality
Talk is cheap, anger without action is a turnoff, and even at 15 my daughter sensed that her father’s rage was born of impotence. I thought of Mark Twain’s line, “The human race is a race of cowards; and I am not only marching in that procession but carrying a banner.”
A few weeks later, Léa was gone, back to France, where she lives with her mother. I had new material to chew into bitter cud. It was a report titled “Grow Together or Pull Further Apart?: Income Concentration Trends in New York,” issued in December 2010 by a Manhattan-based nonprofit called the Fiscal Policy Institute (FPI). The 25-page report only quantified in hard data what most New Yorkers—the ones struggling to survive (most of us)—understood instinctively as they watched their opportunities diminish over the past three decades.
New York, the FPI informs us, is now at the forefront of the maldistribution of wealth into the hands of the few that has been ongoing in America since 1980, which marked the beginning of a new Gilded Age. Out of the 25 largest cities, it is the most unequal city in the United States for income distribution. If it were a nation, it would come in as the 15th worst among 134 countries ranked by extremes of wealth and poverty—a banana republic without the death squads. It is the showcase for the top 1 percent of households, which in New York have an average annual income of $3.7 million.
These top wealth recipients—let’s call them the One Percenters—took for themselves close to 44 percent of all income in New York during 2007 (the last year for which data are available). That’s a high bar for wealth concentration; it’s almost twice the record-high levels among the top one percent nationwide, who claimed 23.5 percent of all national income in 2007, a number not seen since the eve of the Great Depression. During the vaunted 2002–07 economic expansion—the housing-boom bubble that ended in our current calamity, this Great Recession—average income for the One Percent in New York went up 119 percent. Meanwhile, the number of homeless people in the city rose to an all-time high in 2010—higher even than during the Great Depression—with a record 113,000 men, women, and children, many of them constituting whole families, retreating night after night to municipal shelters.
But here’s the most astonishing fact: The One Percent consist of just 34,000 households, about 90,000 people. Relative to the great mass of New Yorkers—9 million of us—they’re nobody. We could snow them under in a New York minute.
And yet the masses—the firefighter, the police officer, the postal worker, the teacher, the journalist, the subway conductor, the construction worker, the social worker, the engineer, the architect, the barkeep, the musician, the receptionist, the nurse—have been the consistent losers since 1990. The real hourly median wage in New York between 1990 and 2007 fell by almost 9 percent. Young men and women ages 25 to 34 with a bachelor’s degree and a year-round job in New York saw their earnings drop 6 percent. Middle-income New Yorkers—defined broadly by the FPI as those drawing incomes between approximately $29,000 and $167,000—experienced a 19 percent decrease in earnings.
Almost 11 percent of the population, about 900,000 people, live in what the federal government describes as “deep poverty,” which for a four-person family means an income of $10,500. (The average One Percenter household in New York makes about that same amount every day.) About 50 percent of the households in the city have incomes below $30,000; their incomes have also been steadily declining since 1990. During the gala boom of 2002–07, the trend was unaltered: The average income in the bottom 95 percent of New York City households declined.
According to the FPI, the wealth of the One Percent derives almost entirely from the operations of the sector known as “financial services,” whose preoccupation is something they call “financial innovation.” The One Percenters draw the top salaries at commercial and investment banks, hedge funds, credit card companies, insurance companies, stock brokerages. They are the suit people at Goldman Sachs and J.P. Morgan and AIG and Deutsche Bank. To get a sense of how their fortunes have blossomed, consider the fact that the largest 20 financial institutions in the United States, almost all of them based in New York, now control upward of 70 percent of the country’s financial assets, roughly double what they controlled in the 1990s.
And what do the suit people do to earn such heaping returns? At one time, the financial sector could be relied upon to allocate capital for the building of things that society needed—projects that also invariably created jobs. But productivity is no longer its purview. Lord Adair Turner, a financial watchdog and former banker in the city of London—the other world capital of finance—recently denounced his class as practitioners and beneficiaries of a “socially useless activity.” Paul Woolley, who runs a think tank in London called the Centre for the Study of Capital Market Dysfunctionality, observed that the “presumption that financial innovation is socially valuable” was a kind of metaphysics. “It wasn’t backed by any empirical evidence,” Woolley told John Cassidy, a staff writer for The New Yorker.
Structured investment vehicles, credit default swaps, futures exchanges, hedge funds, complex securitization and derivative pools, the tranching of mortgages—these were shown to have “little or no long-term value,” according to Cassidy. The purpose was to “merely shift money around” without designing, building, or selling “a single tangible thing.”
The One Percent seek only exchange value, not real value. Thus foreign exchange currency gambling has skyrocketed to 73 times the actual goods and services of the planet, up from 11 times in 1980. Thus the “value” of oil futures has risen from 20 percent of actual physical production in 1980 to 1,000 percent today. Thus interest rate derivatives have gone from nil in 1980 to $390 trillion in 2009. The trading schemes float disembodied above the real economy, related to it only because without the real economy there would be nothing to exploit.
Behold, then, the One Percenter in his Wall Street tower. He creates “value” by tapping on keyboards and punching in algorithms. He makes money playing with money, manipulating abstractions. He manufactures and chases after financial bubbles and then pricks them. He speculates on mortgages, car loans, credit card debt, the price of the gas that keeps the real economy moving, the price of the food that keeps the labor pool alive, always hedging his bets so that he comes out ahead whether society wins or loses.
Finance as practiced on Wall Street, says Paul Woolley, is “like a cancer.” There is only maximization of short-term profit in these “financial services”—they are services only in the sense of the vampire at a vein. There is no vision for allocating capital for the building of infrastructure that will serve society in the future; no vision for, say, a post-carbon civilization; no vision for surviving the shocks of coming resource scarcity. The finance nihilist doesn’t look to a viable future; he is interested only in the immediate return.
The History of Income Inequality: Rotten Vegetables
The optimist will say that the wealth disparities in New York have been far worse in the past, and the optimist would be correct. When in 1869, for example, a young journalist named Henry George arrived in New York, already the most opulent city in America, he found that “amid the greatest accumulations of wealth, men die of starvation, and puny infants suckle dry breasts.”
Income inequality got worse. There came the Panics of 1873 and 1884, which resulted from the speculation and stock fraud of the city’s financial and business elite. Epicentered in lower Manhattan, the panics—we’d call them crashes today—produced nationwide shock waves of mass unemployment, homelessness, hunger, years of depression and dislocation, and, at times, the specter of all-out chaos. President Grover Cleveland, aghast at the scope of the division between the few very rich and the many poor, concluded that the “wealth and luxury of our cities,” primarily enjoyed by the industrial monopolists and the financier and Wall Street class, was “largely built upon undue exactions from the masses of our people.”
The exactions in New York, as with every city where unregulated industrial capital ran amok, were most felt in the profitable horrors of wage slavery: the 14-hour workdays, the miserable pay, the children forced into labor, the dangerous conditions on factory floors, the rents extracted by landlords for the opportunity to live in rat-infested, soul-destroying tenements.
In answer, across New York City throughout the 1880s there were strikes, marches, boycotts, gigantic torch-lit demonstrations. New York’s Central Labor Union (CLU), a branch of the Knights of Labor, whose national membership approached 700,000, welcomed all the “producing classes,” skilled and unskilled: the bricklayers, the jewelers, the printers, the industrialized brewers and machinists, the salesclerks, bakers, cloak makers, cigar makers, piano makers, musicians, tailors, waiters, Morse operators, Protestants, Catholics, Jews, whites and blacks, men and women. The only people they refused to welcome in their ranks, wrote historians Edwin G. Burrows and Mike Wallace, were “bankers, brokers, speculators, gamblers, and liquor dealers”—what the Knights and other radicals of the time called the “fleecing classes,” the “parasites,” the “leeches.”
The CLU and the Knights organized the first Labor Day parade in the United States, on September 5, 1882, marching 20,000 strong from City Hall to Union Square. The seamstresses along the route waved handkerchiefs from windows and blew kisses at the marchers. When the ladies at their sills saw cops and thugs hired by the fleecing classes, they rained down rocks, eggs, rotten vegetables.
By 1886 the labor coalition was looking for a radical candidate for mayor, and they found one in Henry George, who by then had become a famous writer, known on four continents. Seven years earlier, he had published a book of economics called Progress and Poverty that during the last decades of the 19th century would outsell every book but the Bible. His chief contribution was to acquaint the lay American with the problem of “economic rent” in society. This was defined as revenue with no corresponding labor or productivity; economic rent was unearned income.
Those who benefited from this income were known as rentiers, and the most egregious rentier in George’s day was the landlord, who, sitting on land as it rose in value, got rich on the backs of his tenants “without doing one stroke of work, without adding one iota to the wealth of the community.” Political liberty required also economic liberty, said George, and economic liberty required doing away with the privileges of the rentier.
In declaring his candidacy, George decried the “principle of competition upon which society is now based.” He announced to an ecstatic public that his intention was “to raise hell!” He saw only corruption in government as it was then constituted, and suggested that “a revolutionary uprising might be necessary to turn out the praetorians who were doing the corporations’ bidding in government office.” But George was defeated in the 1886 campaign, and new and more advanced rentiers, typified by J.P. Morgan, with his offices at 23 Wall Street, rose to dominate the American political economy. By the turn of the 20th century, Morgan had directed a massive consolidation of banking and, through the leverage of credit and debt, industry. This superconsolidation, which came to be known as monopoly finance capitalism, extended the influence of New York bankers nationwide to the point that, as Woodrow Wilson observed in 1911, “all our activities are in the hands of a few men” who “chill and check and destroy genuine economic freedom.”
It would take decades of labor unrest and protest, coupled with the near total collapse of monopoly finance capitalism after 1929, to smash the power of New Yorkers like Morgan and secure some measure of economic equality in the United States. The institutions exploited by the bankers—commercial banks, investment banks, insurance companies, stock brokerages—were broken up and regulated. Antitrust law barred the supersizing of corporations in mergers and acquisitions. The incomes of the very rich were heavily taxed. The finance rentier was placed in the cage where he belonged.
New York City stood at the forefront of the new progressivism. It was here that the nation’s first large-scale system of low-cost housing was built, here that some of the earliest labor and social welfare policies were developed and enforced—efforts to regulate working conditions on factory floors, reduce working hours, mandate equal pay for women.
New York developed one of the largest social services sectors of any city in the United States. Its universities were free. It had 22 public hospitals. Its public transit system was the largest in the world, and cheap—you could ride 15 miles for 15 cents. It was still a city, with all the attendant ills of a metropolis, in many ways too big, entangled in bureaucracies, full of corruption and crime, congestion and pollution, racial and ethnic division. Yet by 1945 it was home to a strong and stable middle class, anchored in industry and the trades. It was becoming a city of equals.
During this period of relative economic equality, roughly from World War II to around 1980—a period known to economic historians as the Great Compression, as income and wealth leveled out nationally following the reforms of the 1930s—the city also experienced a series of artistic and creative revolts that cemented its reputation as a cultural mecca. Jazz flowered here; so did folk music, so did the avant-garde of modern art, so did the Beats, so did punk and hip-hop.
Income Inequality, Sterility and the Death of Culture
And what of the city as engine of culture? The art critic Robert Hughes pronounced New York a fading star as early as 1990—just 10 years into our new Gilded Age—“when the sheer inequality of New York became overpowering,” he wrote. “Could a city with such extremes of Sardanapalian wealth and Calcutta-like misery foster a sane culture?” Hughes declared it could not. Between 1980 and 1990, the One Percenters’ conspicuous concentration of money inflated the art market, which was soon “run almost entirely by finance manipulators, fashion victims, and rich ignoramuses.” The “impulses of art appreciation and collecting,” lamented Hughes, were now “nakedly harnessed to gratuitous, philistine social display.”
At the same time, rents skyrocketed, driven by speculative real estate development. By the 1980s, wrote Hughes, “the supply of affordable workspace for artists in Manhattan finally ran out.” In a somber observation, Hughes noted that “it was always the work of living artists, made in the belief that their work could grow best there and nowhere else, that fueled New York. The critical mass of talent emits the energies that proclaim the center; its gravitational field keeps drawing more talent in, as in the combustion of a star, to sustain the reaction. The process is now dying.”
Thirty years on, with rents at historic highs, this has been a long death march, swallowing in its pall not only the artist but also the writer, the poet, the musician, the unaffiliated intellectual. The creative types sense that they are no longer wanted in New York, that money is what is wanted, and creative pursuits that fail to produce big money are not to be bothered with. But it is rent, more than anything else, that seals their fate. High rent lays low the creator, as there is no longer time to create. Working three jobs 60 hours a week at steadily declining wages is, as a sizable number of Americans know, a recipe for spiritual suicide. For the creative individual the challenge is existential: finding a psychological space where money—the need for it, the lack of it—won’t be heard howling hysterically day and night.
Crain’s New York Business, not known as a friend of the arts, reports the endgame of the trend identified by Hughes, namely, that the young painter and sculptor are now sidestepping New York altogether, heading instead to cities like Pittsburgh, Philadelphia, Cleveland, and overseas to Berlin—wherever the rents are low and the air doesn’t stink of cash. The Times reports that freelance musicians in New York are killed off in a marketplace that no longer has need for them. The once-great philharmonics, mainstay of a New York tradition, are crippled by lack of listeners, lack of funding; Broadway replaces the live musician in the well with the artifice of sounds sampled out of computers. New York loses its “standing as a creative center,” reports Crain’s. It becomes “sterile.” It is “an institutionalized sort of Disneyland” where “art is presented but not made.” Henceforth it will no longer be “known as a birthplace for new cultural ideas and trends.”
In Brooklyn, I bump into a newspaper editor I once worked with who tells me he is abandoning the city. He talks of Costa Rica, the dark side of the moon, even Los Angeles. Anywhere but New York. “It’s just too depressing to watch what’s happened,” he tells me. “The place is creatively bankrupt.” He had freelanced at the paltry rates that freelancers are expected to survive on—the wages dropping always lower, the marketplace for journalism devalued by “content mills” and “information aggregators” staffed by content serfs producing blog entries. Then he attempted to start a small newspaper in Brooklyn. The investors weren’t interested. “They want digital projects that promise an all-or-nothing billion dollars,” he tells me. “I just don’t get that buzzy creative vibe from New York anymore. I see mercenarianism. Cynical ambition. Monied dullness. People trying to get rich and cash out. It’s always a CEO and CTO and CFO launching a new web property. Not writers and editors getting together because they have common visions.”
This is old news. Technologic advances in the digital world order now mandate that the journalist vies in the editorial room with technocrats advising on the method for tweaking headlines and articles to the rhythm of Google. The model is from advertising: Find what people want to hear, then echo it in the news so that they will be attracted to hear more of it.
“If you want to know what’s really going on in a society or ideology, follow the money,” writes author Jaron Lanier. “If money is flowing to advertising instead of to musicians, journalists, and artists, then a society is more concerned with manipulation than with truth or beauty. If content is worthless, then people will start to become empty-headed and contentless. . . . Culture is to become precisely nothing but advertising.” No surprise then that the most lucrative “creative” jobs in New York for the “aggregating” of “content” are not in journalism but in corporate media, advertising, and marketing—the machines of manipulation and deceit.
It is August again, one year later, and my daughter is back in town. She brings with her a gift from Paris: a little book, barely a pamphlet, published in French under the title Indignez-Vous! which translates as “Cry Out!” or “Get Indignant!” or, perhaps more accurately, “Get Pissed Off!” It sold 600,000 copies in France when it was published last spring.
The author is a 93-year-old French diplomat named Stéphane Hessel, who, during World War II, trained with the Free French Forces and British secret service in London, parachuted into Vichy France ahead of invading Allied troops in 1944, fought in the Resistance on his native soil, was captured by the Gestapo, and did time in two concentration camps.
In “Cry Out!” Hessel reminds us that among the goals of the fight, as stated by the National Council of the Resistance following the defeat of Nazism, was the establishment in France of “a true economic and social democracy, which entails removing large-scale economic and financial feudalism from the management of the economy.” “This menace,” he writes—the menace of the fascist model of finance feudalism—“has not completely disappeared.” He warns that in fact “the power of money, which the Resistance fought so hard against, has never been as great and selfish and shameless as it is now.”
For the One Percent are a global threat, found in every city where the technocratic managers of global capital seek to make money without being productive. They are in Moscow, London, Tokyo, Dubai, Shanghai. They threaten not merely the well-being of peoples but the very future of Earth. The system of short-term profit by which the One Percenters enrich themselves—a system that they have every interest in maintaining and expanding—implies everywhere and always the long-term plundering of the global commons that gives us sustenance, the poisoning of seas and air and soil, the derangement of ecosystems. A tide of effluent is the legacy of such a system. An immense planetwide income inequality is its bequest, the ever-expanding gap between the few rich and the many poor.
Therefore, cry out—though the hour is late.
What is needed is a new paradigm of disrespect for the banker, the financier, the One Percenter, a new civic space in which he is openly reviled, in which spoiled eggs and rotten vegetables are tossed at his every turning. What is needed is a revival of the language of vigorous old progressivism, wherein the parasite class was denounced as such. What is needed is a new Resistance. We face, as Hessel describes, a system of social control “that offers nothing but mass consumption as a prospect for our youth,” that trumpets “contempt for the least powerful in society,” that offers only “outrageous competition of all against all.”
“To create is to resist,” writes Hessel. “To resist is to create.”
Such creativity, alas, is unlikely in New York. The city is regressing, and this sparks no protest from its people. Too many New Yorkers, it appears, want to join the One Percent, want the all-or-nothing billion dollars. New York City, once looked upon as a crowning achievement of our civilization, one of its most progressive cities, is now the vanguard for the most corrosive tendencies in society. My daughter would probably do better to forget about this town.
Christopher Ketcham has written for Harper’s, The Nation, Salon, Mother Jones, National Geographic, and many other periodicals and websites. Excerpted from Orion (November/December 2011), a nominee for both environmental coverage and general excellence in the 2011 Utne Independent Press Awards.