by Greg Palast
CHAPTER 5
THE CLASS WAR
Hope I Die Before My Next Refill
Dispatches from the war of the movers and shakers against the moved and shaken, including No Child’s Behind Left, the Grinch That Stole Overtime and the Chávez of Louisiana. Welcome to 1927.
This is an impressive crowd: the Haves and the Have-Mores.
—Presidential candidate G.W.Bush Waldorf Astoria, $800/plate dinner October 2000
You don’ geddit, Palast, do you? They din’ screw up. They love it. What’s Cheney’s old Halliburton business? “Oil services”—that means drilling platforms and pipes and all that. “Emergency services” too. And I been working “infrastructure A.E.”—architecture-engineering, my friend, with Brown & Root. Well, Cheney’s hit the trifecta with this one, “the biggest reconstruction project since the pyramids”—oil, emergency repairs, bridges, levees, canals, power plants. You know it and I know it: Dick Cheney’s the only guy in America who’d rather have a hurricane than a blow job.
—Fishhead, Ninth Ward, New Orleans, September 2005
America went through a terrible year. The levees broke in New Orleans. When bodies floated in the streets, the Republican Congress saw an opportunity for more tax cuts and consolidation of the corporatopia they had created for their moneyed donors. The Democratic Party was clueless, written off, politically at death’s door.
The year was 1927.
Back then, when the levees broke, America awoke. Public anger rose in a floodtide, and in that year, the USA entered its most revolutionary period since 1776. The thirty-four-year-old utility commissioner of Louisiana, Huey P. Long, conceived of a plan to rebuild his state based on a radical program of redistributing wealth and power. The ambitious Governor of New York, Franklin D. Roosevelt, adopted it, and later named it The New Deal. America got rich and licked Hitler. It was our century.
It’s 1927 again.
But this time, the Haves and Have-Mores have something better for you than a New Deal. They are offering “opportunity”—a lottery ticket instead of a guarantee. Like double-or-nothing in the stock market instead of Social Security—will the suckers go for it? There’s one born every minute. I can’t believe they’re the majority, but at last count, they numbered over 59 million. And they vote.
Years from now, in Guantánamo or in a refugee relocation “Enterprise Zone,” your kids will ask you, “What did you do in the Class War, Daddy?”
We may have to admit that conquest and occupation happened before we could fire off a shot.
The trick of class war is not to let the victims know they’re under attack. That’s how, little by little, the owners of the planet take away what little we have.
As both a journalist and economist (trained by Milton Friedman and Art Laffer, no less), I think of myself as a war correspondent in the class conflict. The point of this chapter is to find out, from the trenches, what happened that left the average American in peril. It will take us from the Peninsula Hotel in Beverly Hills to Larry King Live to Japanese swine-feed microbe thieves and back to “The City That Care Forgot,” New Orleans.
Tomorrow’s Bacon
So who’s winning? It’s a crude indicator, but let’s take a peek at the Class War body count.
If you thought I have nothing nice to say about George W. Bush, look at this: The World Bank reports that the USA has more millionaires than ever—7.4 million! And over a decade, the number of billionaires has more than tripled, 341 of them! And, if they’re lucky enough to die before the inheritance tax break expires, they won’t have to pay taxes on any of it.
If that doesn’t make you feel like you’re missing out, this should: You, Mr. Median, are earning, after inflation, a little less than you earned when Lyndon Johnson reigned. Median household income—and most of us are “median”—is down. Way down.
The chart below represents a typical Bush year.
Mr. Bush and friends are offering us an “ownership” society. But he didn’t mention who already owns it. The richest fifth of America owns 83% of all shares in the stock market. But that’s a bit misleading because most of that, 53% of all the stock in the market, is owned by just one percent of American households.
And what does the Wealthy One Percent want? Answer: more wealth. Where will they get it? As with a tube of toothpaste, they’re squeezing it from the bottom. Median paychecks have gone down by 4% during the current regime, but Americans in the bottom fifth have seen their incomes sliced by 20%. And CEO pay at the Fortune 500 has bloated by 51% during the first four years of the Bush regime to an average of $8.1 million per annum.
When Reagan took power in 1980, the One Percent possessed 33% of America’s wealth as measured by capital income. By 2006, the One Percent has swallowed over half of all America’s assets, from sea to shining sea. One hundred fifty million Americans altogether own less than 3% of all private assets.
Yes, American middle-class house values are up, but we’re blowing that gain to stay alive. Edward Wolff, the New York University expert on income, explained to me that, “The middle class is mortgaging itself to death.” As a result of mortgaging our new equity, 60% of all households have seen a decline in net worth.
Is America getting poorer? No, just its people, We the Median. In fact, we are producing an astonishing amount of new wealth in the USA. We are a lean, mean production machine. Output per worker in America has zoomed by 15% over four years through 2004. Problem is, as the chart shows, although worker productivity keeps rising, the producers are getting less and less of it.
The gap between what we produce and what we get is widening like an alligator’s jaw. You should recognize the chart on the next page: It’s nearly identical to the pattern in India and China. The same jaws—productivity widening over wages—open here because they open there as workers, not products, compete.
The more you work, the less you get. It used to be that as the economic pie got bigger, everyone’s slice got bigger too. No more. The One Percent have swallowed your share before you can get your fork in.
U.S. Productivity vs. Wages
Of course, there are killjoys who cling to that Calvinist-Marxist belief that a system forever fattening the richest cannot continue without end. Professor Michael Zweig, Director of the State University of New York’s Center for Study of Working Class Life, put it in culinary terms: “Today’s pig is tomorrow’s bacon.”
The Grinch That Stole Overtime
What we see is that the richest get richer not by “creating wealth” but by taking yours. How? In their “jaws” they are eating up America’s productivity like a salami, a slice at a time. And when they’re really good at it, really subtle and sly, you don’t even know the knife is going in.
Here’s a significant example. America’s 40-hour workweek? Well, forget it, it’s gone—for 2.7 million workers, at least. The rest of us are next. I’m sure you’ve already caught that interesting little item on page 15,576 of the 2003 Federal Register.
According to the Register, where the Bush Administration likes to place its little gifts to major campaign donors, those 2.7 million workers will lose their overtime pay. What this means is that nearly 3 million workers receiving time-and-a-half by law after they’ve worked 40 hours will no longer get the extra. It’s a change in the Wage and Hour Law, blowing a big hole through the 60-year-old rule that established America’s workweek, cornerstone of FDR’s New Deal. The idea of that law was to discourage wage-slave hours and encourage hiring additional staff. And it worked. Now it won’t.
The Bush Administration dropped this little piranha into the Register just before Labor Day 2003. Are these guys droll or what?
Look on the bright side. In the Register, Mr. Bush’s Labor Department says the change in the Wage and Hour Law will produce a “benefit” of $1.53 billion. I put “benefit” in quotes because, in the official cost-benefit analysis, the amount employers will now be able to slice out of workers’ pockets is tallied on the positive side of the rules
change.
Mr. Bush has a good cover story. In September 2004, at the Republican Convention, the President announced he was changing overtime rules to give workers “comp time” off instead of pay, so we could spend more time with our families. Thanks, Mr. President. He forgot to mention that a few days before, on August 23, 2004, his Labor Department had already put in half the plan—eliminating overtime pay, the page 15,576 scheme—while failing to put into the regs one word about comp time. In the pre–September 11 days, we called that “lying.”
We’re not talking high-level executives or lawyers here; they’ve always been exempt from the 40-hour-week rule. We’re talking mostly restaurant-chain workers.
Nevertheless, workers getting their pay snipped shouldn’t complain, they will all be receiving promotions to management, because all an employer has to do is reclassify his worker bees as “managers” and they lose the legal right to overtime. Would you be surprised to learn this new rule was slid into law at the suggestion of lobbyists for the National Council of Chain Restaurants? You’ve met their “managers”—they’re the ones in the beanies and aprons whose management decisions are “Hold the lettuce on that.”
My favorite little rules change that sneaked into the Register would also reclassify as “exempt professionals” anyone who learned their skill in the military. In other words, thousands of veterans will now lose overtime pay on their return. For life. Now there’s a veterans’ benefit.
In fairness, I must add that, according to Labor Secretary Elaine Chao’s press office, the rules changes will extend overtime benefits to 1.3 million burger-flippin’ managers. How does that square with the billion-dollar “benefit” to business owners? Simple: The Chao hounds at the Labor Department suggest that employers cut wages so that, added to the new “overtime” pay, the employees won’t actually take home a dime more.
I can hear the moaners and bleeding hearts saying this sounds like the Labor Department is telling Big Business how to evade the law. Yep, that’s what the Department is doing. Right there on page 15,576 of the Federal Register it says:
Affected employers would have four choices concerning potential payroll costs:… (#4) converting salaried employees’ basis of pay to an hourly rate that results in virtually no changes to the total compensation paid those workers.
And in case some employer is as dense as a president and doesn’t get the hint, Comrade Chao repeats, “…The fourth choice above results in virtually no (or only a minimal) increase in labor costs.” For decades the courts have thrown the book at cheapskate bosses who chisel workers out of legal overtime by cutting base pay this way… but now they’ll have a new defense: Bush made me do it.
But then, there likely will not be any cases against employers anyway, since Secretary of Labor Chao herself is the labor cop whose job it is to stop paycheck theft by chiseling employers. She’s well qualified for her job. Her resumé reads, “Married to Republican Senator Mitch McConnell of Kentucky.” I called her press office to ask if she qualifies for overtime, but they’d left the office early.
On Labor Day weekends, our President likes to play a few holes of golf. These labor law changes contain some good news for our sporting President. Under Chao’s new rules he need not worry if he wants to replay that hole. “Exempt professionals” who cannot earn overtime—once defined as doctors, lawyers and those with specialized college degrees—will now include anyone who provides skilled advice… like caddies (“You might try the other end of the club, Mr. President”).
No Deal
What’s at stake here is the New Deal, Franklin Roosevelt’s 1933 program that guaranteed what he called “Freedom from Fear and Freedom from Want.” It was not, as misrepresented today, a program just for pulling America out of an economic depression, but a vision of government that takes ultimate responsibility for protecting its citizens’ lives and livelihoods from misfortune and injustice. That was one hell of a radical program then. Before Roosevelt, if you got old and starved, well, tough luck. If you lost your job or your home blew down in a hurricane, too bad, Jack. If the power company charged you half your wages for your light bill; or the grain monopoly refused to buy your crop for more than the price of dirt; or if you worked 60 hours in the steel mill with no overtime pay; or if you joined a union and got busted over the head, it was that’s business, buddy.
In his first one hundred days in office, Roosevelt tried to break the back of the that’s business, buddy monopolists, passing through Congress a firestorm of legislation including the Wage and Hour Law, Social Security and the National Reconstruction Act.
And the current crew in Washington just hates it. This chapter, indeed this book, is all about how they are taking these American rights away, stripping them off you one by one, from the Wage and Hour Law’s 40-hour week to the Clayton Antitrust Law to the False Claims Act to the laws that keep your lights on and your pensions protected. Many are laws that you’ve probably never heard of, like the Public Utility Holding Company Act. But, take my word for it, you’ll miss them when they’re gone.
These Little Piggies Went to Market
Honolulu, Hawaii. Four men in a hotel room. Unaware of the camera hidden in the bedroom lamp, they begin to share their most intimate secrets, as they had so many nights before, about pig food.
It’s not a Paris Hilton video, but the FBI’s grainy film of the chiefs of the world’s pig feed industry is weirdly fascinating. Listen to Terry Wilson, a vice president of Archer Daniels Midland, the biotech food giant that NPR News calls “Supermarket to the World.” In the 1994 Hawaii meeting, Wilson stood up to preach passionately ADM’s customer relations philosophy to Japanese and European competitors:
We are gonna get manipulated by these goddamn buyers. They are not your friend. They are not my friend. All I wanna tell ya again is, let’s put the prices on the board, let’s all agree that’s what we’re gonna do and then walk out of here and do it!
And they did it. They literally drew lines through a map of the planet and marked up which corporation got which slice of the world market for different products, including Vitamin C and lysine, the pig-feed additive; then they set the price. They kicked up the price of the pig food from $0.70 a pound to $1.20.
We have the tape of the Hawaii price-fixing confab (and a dozen others recorded in Paris, Tokyo and Mexico City) only because the FBI got lucky. The head of ADM’s Frankenstein foods (bioengineering) division at the time, Dr. Mark Whitacre, is a self-confessed swindler and psychopath who enjoyed recording 237 meetings in which delegates bickered over the boring details of the administration of a billion-dollar conspiracy.
On the tapes, you can see how ADM easily got Roche, the Swiss drugmaker, on board, but the Japanese were squirrelly. So ADM’s Vice Chairman, Mick Andreas, made the Japanese an offer they couldn’t refuse. Borrowing from the Saudi Arabian playbook for cartel creation, ADM built a lysine plant in Illinois with enough capacity to fatten every pig on the planet—and bankrupt every producer worldwide. With this reserve he could tell competitor Ajinomoto of Tokyo: Either the Japanese agree to fix prices and market shares or ADM will open its lysine reserves and drown the globe in swine food.
When the Japanese executives questioned ADM’s ability to produce the biotech food in such quantities, Andreas took them on a tour of the enormous U.S. plant. The Japanese came away awed by ADM’s technology. (They also came away with proprietary microbes which they had stolen by wiping handkerchiefs on machine railings.)
On June 27, 1995, a team of seventy G-men raided ADM’s Chicago headquarters. The company, along with Japanese firm Ajinomoto, Roche and Bayer, was charged with conspiracy to fix prices, a felony. Several executives did jail time: Mick Andreas, Wilson and Whitacre.
But ADM had prepared its defenses. The company’s Chairman (Mick’s dad), Dwayne Andreas, a friend of President Clinton, was known as the single largest contributor to both the Democratic and Republican parties (until Ken Lay took that honor away). Andreas père once left an envelop
e in the Oval Office for Richard Nixon containing $100,000 in cash—funds that ended up paying for the break-in at the Watergate.
The ADM cabal may have cuddled and coddled our lesser presidents, but Teddy and Franklin Roosevelt’s laws that made fixing prices a felony remained on the books to nail Andreas’s son. In 1999, ADM paid $195 million in fines and Mick Andreas was sentenced to break rocks on a chain gang (and, weirdly, Roche even flew in an executive to serve time with Mick). Then U.S. lawyers for consumers hit ADM and conspirators for $800 million in restitution.
Truth, justice and the men with shiny badges win. So it seemed, but something was bugging me. Swiss, French and Japanese executives had cashed in with ADM, and paid something to the U.S. Treasury and American customers. But except for Roche’s designated fall guy, the other European and Asian conspirators were still skiing the Alps and sucking sushi in style, spending the ill-gotten loot they’d drained from their designated monopoly slices of the planet. The European Union didn’t touch a hair on their heads or a dime in their bank accounts.
Then I remembered what an acquaintance, Stanley Adams, had told me. He said that Roche had been running a multibillion-dollar price-fixing ring decades before the FBI started recording the world carve-up sessions. Adams should know: He was in charge of enforcing the price-fixing scheme as head of Roche’s North and South American Bulk Vitamins division.