[Note: This is a rather long essay I wrote a little less than one year ago about three books which related--in a "big picture" sense--to the state of the US. With help from two talented editors, however, I've recently updated it and I think it still holds up quite well.]
Überpower: The Imperial Temptation of America
By Josef Joffe
W.W. Norton & Company, 272 pp., $24.95; $13.95 (paperback)
The Return of Depression Economics and the Crisis of 2008
By Paul Krugman
W.W. Norton & Company, 224 pp., $16.47; $11.53 (paperback)
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save th Financial System – and Themselves
By Andrew Ross Sorkin
Viking, 624 pp., $10.80 (paperback)
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The American Century
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We Americans generally like to think of ourselves as a positive-minded people, but I doubt that I’d be causing much protest or surprise in saying that the last ten years have not been kind to the United States of America. This little chunk of American history, after all, was the stage for three bitterly contested presidential elections, two grueling and enduring foreign wars, two economic recessions (the latter of which was the worst since Hoover), the near-total devastation of our greatest cities, and, of course, the largest and most horrific attack on American life since Pearl Harbor. This decade was so disastrous, it never even earned a proper name. Some called it the Aughts, others, the Zeroes or the Os. Perhaps most appropriately, Time magazine simply called it “the Decade from Hell”.
Yet naïve as it may seem from today’s vantage, most of us can likely remember how optimistic a time the early moments of the 21st century were. Just the name itself—the 21st century—seemed to portend the dawning of a grand new era of peace and achievement. On the domestic front, Americans were enjoying the fruits of an unparalleled period of economic boom times; supposedly, the rising tide was lifting all boats. The social tensions that had rocked the country since the 1960s had not disappeared, but the widespread peace and prosperity, so the myth went, had smoothed over previously volatile divisions. Even tragedies such as the Oklahoma City bombing, the Los Angeles riots or the Columbine High School massacre—moments of shattering discord which should have exposed these narratives of harmony for the fantasies they were—could be repurposed into something far more manageable. Men like Oklahoma City bomber Timothy McVeigh, Columbine killers Harris and Klebold, or the LAPD officers who let Rodney King know that, no, we can’t all just get along—it was said, that examples such as these merely revealed that the greatest social threat in the coming age was a toxic ennui. A regrettable but inevitable by-product of life in what the neoconservative scholar Francis Fukuyama so famously called “the End of History.”
Abroad, the Soviet Union had been dead for nearly a decade. It was a first in American history: the nation lacked a credible foe. Of course, competition is the lifeblood of capitalism; thus our brief dalliance of Japanophobia in the late 1980s. But when Japan’s export bubble popped, it did more than end a decade of rapid growth. It ruined our best hope for a new national foil. China was growing—and they were still Communists, weren’t they?—but not even die-hard advocates for perpetual military readiness could feign concern over the Communist Party’s General Secretary at the time, the bespectacled Jiang Zemin. Saddam Hussein’s unique version of brutal authoritarian evil remained supreme in Iraq, yes; but we had already shown in ’91 when he was at his peak what quick work disciplining the Iraqi tyrant would be. Indeed, worthy adversaries seemed to be a thing of the past; the future would hold tightly limited, highly effective bombing campaigns like that unleashed upon Serbian thugs in Kosovo. A little thwack of the baton by NATO and everything would fall neatly back into place.
This was a time when, with whatever little feigned sincerity he had left, and without fear of sounding syphilitic President Clinton could state in his farewell address that, “America’s best days lie ahead”.
Überpower, the latest book by publisher-editor of the German weekly Die Ziet Josef Joffe, was published five years after Clinton’s statement and three years after the second invasion of Iraq. Nevertheless, it reminded me of those heady days of limitless possibility. Perhaps as a gesture of acknowledgement that the United States’ abilities increasingly looked all too human, its sub-title reads, “The Imperial Temptation of America”. Yet this skeptical, or at least moralistic sub-title (outside of Madison Avenue, I’ve yet to hear good things about temptation)—is misleading. Überpower presents a vision of the United States not as a modern-day Icarus, but, as Joffe repeatedly phrases it, “a giant unbound” (p. 30).
Überpower isn’t quite sure what it wants to be, perhaps a potted history of international affairs since the 18th century, an explanation and diagnosis of anti-American sentiment worldwide, a guide for American policymakers as to the proper course to maintain and extend their nation’s global influence, it is quite sure of what it wants to be like. The evidence is right there. On the front cover, famed New York Times foreign affairs columnist Tom Friedman calls it “Smart” while on the back, best-selling author and CNN host Fareed Zakaria deems the book to be, “A remarkable reflection on America’s role in the world” and “[T]he best book on the subject in years”. With Joffe’s frequent recitations of conventional wisdom, admirably languid prose, and insistence on structuring each chapter as a series of bullet-points, Joffe strikes me as a man who has studied well what it takes to seduce the American book-buying public, small and shrinking though it is, to buy a book about something as drab as international affairs.
If I sound overly dismissive, it’s not because Überpower is a sub-par or less than well-meaning entry into the genre. Although the book is indisputably padded—it comes out to 272 pages when 220 would’ve been just fine—and while I found its third chapter, “The Rise of Anti-Americanism” by turns disingenuous and tedious, Joffe on the whole does a good job articulating the scope and breadth of American hegemony while presenting a thoroughly reasonable strategy for continued global leadership. He advises US policymakers to focus on maintaining what foreign affairs experts like to call “soft power”—i.e., the power a nation can exert on others without military force. He notes that “by resisting the lure of its unprecedented power, the United States will husband its strength instead of squandering it on imperial ventures” (p. 240). True enough.
By the way, did I mention that Überpower was released during the absolute worst days of the war in Iraq? More importantly, did I mention that Joffe was at first a vocal supporter of the invasion? If I forgot to mention where Joffe stood on the question of Iraq, you’ll have to forgive me; my only defense would be that I alone am not without sin—Joffe forgot, too.
Infrequent as it is, Joffe’s treatment of the Iraq war is also cursory and glib. At first, he notes that Baghdad is where “the wondrous new world of the unshackled superpower began to fall apart” (p. 48), but when it comes to explaining why the George W. Bush took his nation into war, all Joffe can manage to say is that “the best explanation is power […] and devotion to the democratic dogma, the oldest in America’s secular religion” (p. 50).
Here represents a fine opportunity for Joffe to not only inform the reader that he, a German—who we must imagine is inoculated against the dangers of this supposedly American disease—also supported the invasion but, more importantly, he could explain his reasons for doing so. While Joffe is right in saying that we can never truly know what went on in president Bush’s head before the invasion, he is especially well-suited to let us know what was going on in his own. Überpower is a whole book of the man’s thoughts on American foreign policy, after all. Joffe has no cause to be so modest.
If, in the absence of admission on Joffe’s part to his original pro-war stance, we are to take the man seriously, then we must rely on that truism of the modern-day public intellectual: better late than never. Eventually, with 12 pages before the book’s end, Joffe does find the time to discuss the second Iraq war in greater detail. Beginning on page 229, he delivers a rather thorough (if mild-tempered) evisceration of the strategic wisdom of the war. His conclusion to this section is a stirringly definitive prognosis of Bush’s error. He writes, “the intervention in Iraq was a war against the wrong foe at the wrong time” (p. 232). Thus ends Joffe’s two-and-a-half page treatment of the second Iraq war, the worst moral and strategic blunder by the United States since Vietnam.
America’s economic and spiritual health was no less damaged by that catastrophic war in the South Pacific than by our latest excursion in the Middle East. But while conventional wisdom would eventually recognize Vietnam’s influence in part to the mix of economic stagnation and inflation (two bad tastes that go horribly together) of the late 1970s, in 2008, the American economy was to suffer a second body-blow far worse than “stagflation”. If the return of a divisive quagmire of a war wasn’t enough to dampen the formerly ebullient American spirit, the worst economic crisis since the Great Depression would have to do the trick.
The economic crisis of 2008 has already spawned a cottage industry of books devoted to explaining why the American economy—and the world with it—came so close to the brink of total dissolution. But while some authors have pointed their fingers towards a culture of excess, or the chickens of Reagan’s sweeping deregulation coming home to roost, or the perils of Democratic policy-makers elevating home-ownership from a luxury of the few to a pseudo-right of the many, Nobel Prize winner and New York Times columnist Paul Krugman’s take is decidedly less philosophical.
The Return of Depression Economics, Krugman’s latest, is an updated version of a book by the same name he released the last time the global economy was near collapse, almost ten years ago. While I never read the original installment, I can say that the book’s subtitle—and the Crisis of 2008—is not just a bumper-sticker added to the cover so as to sell the same book twice.
While the book is written for the layman, it may still be tough going for those of us particularly ill-suited to macroeconomics. Krugman’s parable of the community babysitting co-op, for example, which he repeatedly uses to explain how recessions occur, is cute—but I’d be lying if I were to say it inspired an eureka moment. His explanations of the oft-used phrases “moral hazard” or “selling short/long” are better. But he’s at his best when giving the reader the big picture, explaining what the conventional narrative of 2008 gets wrong and how a globalized economy puts the world at greater risk of sudden collapse.
Krugman’s ultimate message in the book is that despite monetarism’s recent popularity, policy-makers must not forget the benefits of Keynesian economics in depression times. And while anyone who follows the news knows that Krugman’s had more than a few points of disagreement with president Obama since his inauguration, on this fundamental point the two have been in agreement. Last 2009’s “stimulus” bill was exactly the kind of Keynesian deficit-spending Krugman would recommend. It makes one wonder why such a brouhaha was made of his disagreements with the administration, even to the point that Newsweek once featured the economist’s bearded-mug on the cover with the headline “Obama is Wrong”. It wasn’t that Krugman opposed the stimulus bill; he just considered it too small. And while it depends on who you ask, with unemployment as of this writing sitting around 9%, the center-left conventional wisdom has subsequently considered the Nobel Prize winner not in the White House right on this count.
Going against conventional wisdom, Krugman writes that the repeal of the FDR-era Glass-Steagall Act in 1999, which meant that bank holding companies could once again own other financial companies and has frequently been pointed to as a source of the crisis, is overblown. Krugman grants that the repeal was “surely a move in the wrong direction” that “may have contributed in subtle ways to the crisis” but holds that “the crisis, for the most part, hasn’t involved problems with deregulated institutions that took new risks. Instead, it has involved risks taken by institutions that were never regulated in the first place” (p. 163). If Krugman’s right—and I certainly have no cause on these matters to say otherwise—it means that rather than the economic crisis being the result of overzealous free-market politicians (backed with campaign contributions from these bank holding companies, no doubt) stripping away safeguards forged in the fires of the Great Depression and leaving us susceptible to a new economic calamity, the crisis of ’08 is due to some degree to something far less malicious, but more understandable: laziness.
It was the laziness of politicians who, despite the warnings issued by economists that the economic system was in need of serious regulation, chose instead to hold tight to free-market platitudes which rather conveniently urged them to do nothing much at all. In a sense, Krugman’s analysis presents us with a not-too-flattering picture of the last generation or so of America’s political class that’s not unlike a teenager who neglects to do their chores and take out the trash, only to find that a series of brisk walks to the curb have been replaced with the herculean task of transporting a mountain of unruly waste.
Early in the book, Krugman notes how Ben Bernanke, who was Federal Reserve Chairman during the crisis (and was recently appointed to another 5-year term by president Obama and Senate Democrats), had given “a remarkably upbeat speech” arguing that “modern macro-economic policy had solved the problem of the business cycle – or, more precisely, reduced the problem to the point that it was more of a nuisance than front-rank issue” (p. 10).
Bernanke has the luxury, though, of having been in office when the crisis hit and, from all accounts, doing a somewhat decent job of pulling us from the brink (certainly as far as Goldman Sachs is concerned). His predecessor, Alan Greenspan, on the other hand, was not quite so lucky. During much of his tenure at the Fed, Greenspan was regarded as a figure just short of a demigod. But ever since, the man the D.C. media once called the “Oracle” has taken an enormous amount of abuse, from the press and Congress both. In fact, before Tiger Woods’ tumble from grace, it would be fair to say that no other public figure has so recently fallen so far. It even got to the point that Greenspan, a lifelong acolyte—and former friend—of Ayn Rand and a resolute defender of the free-market’s ability to self-regulate, admitted before Congress and the world that the crisis forced him to question what had theretofore been an unshakable faith.
It’s almost enough to inspire pity, and one could be forgiven for wondering why, exactly, Mr. Greenspan has deserved such a public flogging. After all, he was but the loudest voice in a legion chorus. In a section called “Greenspan’s Bubbles”, Krugman offers a reminder: “[He] holds what I believe is a unique record among central bankers: he presided over not one but two enormous asset bubbles, first in stocks, then in housing” (p. 144). Perhaps most damningly Krugman recalls that during the height of the obscene and unsustainable rise of home prices Greenspan called a possible significant decline in their worth “most unlikely” (p. 150). Oops.
Krugman gets, however, that it wasn’t only the Fed chairmen who failed us in the years before 2008. Indeed, it’s too simplistic to declare that the economic meltdown was the inevitable result of a consumer-society run on debt—I find that “society” is often blamed by guilty parties looking to side-step accountability—a disaster of such proportions cannot be the consequence of merely a few bad g-men making a few bad decisions.
In this light, the enormous cast of characters featured in Andrew Ross Sorkin’s epic narrative of the financial crisis, Too Big to Fail, is fitting. Sorkin, the wunderkind New York Times Wall Street reporter, has composed a mammoth 624-page account of the frantic machinations that took place in Manhattan and D.C. in the period between early 2008’s “bailout” of Bear Sterns and late 2008’s passage of TARP to mostly great effect. I couldn’t begin recall all of the figures active in the book; the myriad corporate lawyers, analysts, and bankers working for JP Morgan, Citibank, Goldman Sachs, Merrill Lynch, Bank of America and the doomed Lehman Brothers quickly become indistinguishable. But it doesn’t really matter.
Because although Too Big to Fail is marketed as a fast-paced and thoroughly researched day-by-day retelling of this important period in American history, it’s actually more of a tragedy, and one consisting of only three main characters (Bush is a supporting player at most). The heroes of the book, the men who eventually come to spend every moment of their lives desperately orchestrating one merger after another (and eventually the infamous “bailouts”) in hopes of staving off disaster, are the aforementioned Bernanke, current Treasury Secretary Tim Geithner, who was then president of the New York Fed, and former Treasury Secretary and Goldman Sachs CEO Henry “Hank” Paulson. Paulson and Geithner are portrayed in the most positive light —at times Sorkin’s sympathy trespasses into sycophancy, such as when he remarks on Geithner’s “six-pack abs” (p. 65)—while Bernanke comes off as a responsible but distant technocrat.
Throughout the book, which features a rotating cast of predictably selfish, arrogant and greedy Wall Street alpha-males, these three are the only ones who seem sincerely dedicated to a cause greater than saving their own hides. That said, this motivation can’t be discounted entirely. The portions of the book concerning current Treasury Secretary Geithner, in particular, often seem the most influenced by the give-and-take of access, shall we say. One section in which Tim Geithner goes for an early-morning jog in lower-Manhattan and is overcome with the gravity of the task before him sounds particularly like something that might have come from the mind of the chief speechwriter for the Treasury Department:
This is what it was all about, he thought to himself, the people who rise at down to get in to their jobs, all of whom rely to some extent on the financial industry to help power the economy. Never mind the staggering numbers. Never mind the ruthless complexity of structured finance and derivatives, nor the million-dollar bonuses of those who made bad bets. This is what saving the financial industry is really about, he reminded himself, protecting ordinary people with ordinary jobs.
I don’t doubt that Geithner’s motivations were, on the whole, noble—the man could have been making substantially more money in the private sector while leaving to some other poor bureaucrat the job of cleaning up this horrendous mess. Still, Geithner’s public appearances since being confirmed as Treasury Secretary don’t exactly support the image of a skilled communicator and man-of-the-people presented in the above-quoted caption.
Geithner is Sorkin’s honorable, self-sacrificial hero, but it’s his predecessor, Treasury Secretary Paulson, who provides most of the book’s memorable anecdotes. The Hank Paulson of Too Big to Fail is at once more and less impressive than I was expecting. On the one hand, Sorkin shares amusing stories of the man’s frugality and, rather affectionately, makes sure to note his halting, awkward manner of speech. And one can’t doubt Hank’s heart. By the book’s conclusion, Paulson has beseeched Nancy Pelosi on bended knee to convince her caucus to allow a bailout; he’s also vomited, repeatedly, from exhaustion and stress.
These stories humanize Paulson, a figure who had become the face of a harried bailout plan. Worse still, to many Americans, Paulson came to represent the incestuous relationship between Wall Street and DC. Yet, at the same time, Sorkin makes clear that Paulson took the job as Treasury Secretary in large part just because he could. One close confidant of Paulson is quoted telling him, “You don’t want to be sitting around at eighty years old telling your grandchildren you were once asked to be Secretary of the Treasury. You should tell them you did it.” An understandable argument, to be sure, but a job of such enormous responsibility might have been better-served with a man who, when asked “why?” could respond with something a bit more substantive than “why not?” (p. 39)
As the book progresses, and as Paulson’s unwillingness to offer government subsidies to the failing Lehman Brothers holds firm, the thought that some small measure of the year’s chaos may have been avoided if the Secretary of the Treasury weren’t so hell-bent against sullying his legacy as a free-market Republican becomes unavoidable.
The most striking personality in Too Big to Fail, though, is not a regulator but a banker: Richard Fuld, the former—and last—CEO of Lehman Brothers. Fuld is presented as a stubborn man, undone due to his lack of foresight and his frequently self-destructively unbending loyalty. And while Fuld is a major player only throughout the book’s first third—after which it becomes clear that even if Lehman were to survive, he’d have to step down—the intensity with which he struggles to keep the firm he’s worked for all his life afloat comes to take on a tragic hue. Fuld becomes increasingly detached from reality, still thinking, months after all others have seen the writing on the wall for Lehman Brothers, that salvation might be at hand. In its shallow, petty way, the excruciating fall of this broad-shouldered and overpowering magnate of finance (a man whose negotiating tactics earned him the nickname “Gorilla”) eventually reminds one of a Shakespearean tragedy; Fuld’s Kingdom for a bailout.
Thankfully, Sorkin’s writing never becomes overwrought, and whatever allusions to Shakespeare or the Roman Empire there may be are few and far between. It’s that second comparison—to the former greatest empire on earth—which has become such a hoary cliché, one that any self-respecting writer is hesitant to implement when it concerns the contemporary state of affairs in the US. But, damn it all, when reading of enormous corporations such as AIG—whose executives come to discover that 1. they don’t understand the billion dollar trades they’ve made and 2. said deals leave the company, and global economy, headed for destruction in a manner of weeks—the epic hubris and ineptitude of Nero or Commodus seem the only fitting analog. President Bush wasn’t playing the fiddle as Wall Street burned; but is clearing brush down at the ranch in Crawford, TX really any better?
It’s been quite a while since people spoke so earnestly of American decline. But after one—maybe two—disastrous wars, and a once-in-a-lifetime economic collapse, such talk has become something approaching common wisdom. President Clinton said goodbye with promises of a better tomorrow; in Obama’s inaugural he intoned, “The challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met”. Only time will tell if he’s to succeed. The past few months of not-terrible news on the economy, alongside last year’s tenuously successful elections in Iraq, might hint that though it’s not yet morning in America, the rooster may be poised and ready.
But you’ll excuse me if I’m hesitant to declare a new dawn here just yet. It’s been a long ten years, and, as an American, I’ve learned the perils of declaring Mission Accomplished.