We stand here on the verge of a shift in the American paradigm of spending credit to secure capital regardless of social status, a way of life that was born out of thirty years of fast money and easy credit lines. This moment comes at a time during which there are challenges to some of the core American fairness laws that led to some semblance of equal opportunity, one of which Affirmative Action may take a major blow by the Supreme Court in the coming weeks. In the last thirty years while the rich got richer, all of it was masked by access to credit that made the wealth gap appear to be closing in our daily lives. Access to predatory home loans, for-profit student loans and high interest credit cards served as the proverbial closet for America's historical skeletons. That closet is now full, and showing signs of bursting at the seams, exposing a truth of an America that has not been built purely on a culture of free enterprise and capitalism as so often presented, but also stands upon legally fortified legacy.
From the Roaring '20s to the Depressing '30s and back again, America has dealt with cycles of economic growth. But no growth pattern has presented such a possibility of devastating the culture of U.S. capitalism as that which we are on the verge of today. Over the last thirty years people with limited means acquired debt that would take more than a life time to pay off. A thirty-year mortgage at $3,000-$5,000 a month for a family making less than $70,000 annually, is the equivalent to being trapped by your home (particularly if it's underwater). The question begs how will the economic winds take back the keys to life which consumer credit has afforded an entire generation. It will be done quickly and without regard for feelings, or consideration for struggle.
The keys that were given by credit markets allowed a generation to dream that hope had actually led to progress, but these keys were in fact doorways to a kingdom of debt and misguided views of self worth.
The very condition of a class-based system requires have-nots to remain as such. The trick is to make them accept their status not with the wave of a gun, but rather the movement of a pen. The class based structure in the U.S. that seeped into a more simple line of poor or rich, was supported by a race based substructure of black and white. Yet, in between the delusional opportunities to forward spend on a Visa card given by Chase or Capital One, a reality was lost over this period of what defines a class structure. Here in America unlike many other countries, the poor shopped with the rich at the local mall, they looked at the lives of the rich on entertainment blogs and they watched wealth-based reality shows until the meld of the reality on TV blurred the very line of what actually was the reality in their own home.
Americans overexposed to the chance of change, became underexposed to the cost that believing in chance without giving it the true context of history can bring. A middle class that needed heavy doses of reality instead got sugar in the form of low APRs and plastic cards. I believe as the credit surge halts, and the MasterCards and house keys are taken back, what will be left is a nation in a trance of flat screens, smart phones and designer clothes. The new era that has arrived brings us back to a time where what you will become is based not on how much Chase will loan you without collateral, but rather what your grandfather left for you so many years ago. This reality makes our personal family history more important than ever. Over the last thirty years Americans of all walks forgot (or never learned) this country's true history, and the class/racial structure that defined it some 300+ years prior, starting well before the country's official Declaration of Independence. We were made to believe that the rich got positioned so purely as a result of effort & genius, as though America did not recently abolish the legal institution of Jim Crow, and as though Slavery's illegality became enforceable criminally well before the actual date of 1942 when President Roosevelt signed Circular No. 3591 legislation.
Legacy's power in the U.S. is interesting in that it is remembered for when it carries the gifts of wealth & security, but much more often it bears the unforgiving pain of poverty. It becomes hyper-exaggerated in both directions when laws and policy are designed to expand the gaps between the two groups. I believe that when laws that favor groups create unequal opportunity, it becomes a direct clog in the engine of Capitalism. Free enterprise cannot be free when it is burdened with the weight of a yesteryear, which created mass inequity, so directly by law. Slavery and Jim Crow as legal institutions have legacies that not only clogged American Capitalism from being a truly fair opportunity for all, it has burdened Black America particularly with heavy social cost and chained them as a mass group to lives of struggle. As stated by an opinion article in the Grio "Reagan revisionism can't whitewash his history with blacks," this became exaggerated in an era during which Ronald Reagan and his policies from Trickle Down to the Crack laws turned up that impact exponentially by changing the black families trajectory for the worse. People revise America's history to recreate figures into heroes, repainting their actions with each brush stroke of slanted memory.
I will state undoubtedly many more Americans are affected than just blacks by poverty, but because of the history of this nation and its unwillingness to confront that history, poverty has laid ravage to Black America at a wholly different rate than any other subgroup. Black America today in mass is impoverished, over 10 million of the 40 million self identified African Americans live below the poverty line making less than $11,000 a year, and another large mass of African Americans are classified as "near poor" by new census calculations. A group that played a major role in building the wealthiest country the world has known as free labor, kneels at this country's back porch in poverty. To give a more specific example of context to the statement of what Black America has lost out on with their unpaid labor investment in the U.S., in chapter 2 of his Best Selling book Outliers, Malcolm Gladwell listed the 75 wealthiest people in global economic history. An astounding 45 were American born, an additional 4 men on the list while not born in America made their wealth here. A country that is a mere 237 years old, created 65% of the wealthiest men the world has known. 14 of the group were all born in a single nine-year span, all preceding the industrial revolution. Focusing in specifically on the top of the list, as an example Andrew Carnegie became the second wealthiest man in the history of the world by investing in the steel business ending up as the head of U.S. Steel. Carnegie made his fortune in the steel industry, controlling the most extensive integrated iron and steel operations ever owned by an individual in the United States. According to Forbes he amassed a wealth holding equivalent to nearly 300 billion dollars, adjusting for inflation.
Excerpt from Outlier's List of 75 Richest People in Global Economic History (Below are the individuals that made their wealth in the U.S., and the approximate value of their fortune):
01. John D. Rockefeller 318.3 billion (Standard Oil)
02. Andrew Carnegie 298.3 billion (U.S. Steel)
04. William Henry Vanderbilt 231.6 billion (Chicago Burlington and Quincy Railroad)
06. Andrew Mellon 188.8 billion (Gulf Oil)
07. Henry Ford 188.1 billion (Ford Motor Company)
10. Cornelius Vanderbilt 167.4 billion (New York and Harlem Railroad)
16. John D. Rockefeller Jr. 141.4 billion (Standard Oil)
17. Sam Walton 128 billion (Wal-mart)
18. John Jacob Astor 115 billion (American Fur Comany)
20. Stephen Girard 99.5 billion (First Bank of the United States)
22. Stephen Van Rensselaer III 88.8 billion (Rensselaerswcy Estate)
23. Richard B. Mellon 86.3 billion (Gulf Oil)
24. Alexander Turney Stewart 84.7 billion (Long Island Railroad)
25. William Backhouse Astor Jr. 84.7 billion (Inheritance)
29. Moses Taylor 79.3 billion (Citibank)
30. Vincent Astor 73.9 billion (Inheritance)
33. Jay Gould 67.1 billion (Union Pacific)
34. Marshall Field 66.3 billion (Marshall Field and Company)
35. George F. Baker 63.6 billion (Central Railroad of New Jersey)
36. Hetty Green 58.8 billion (Seaboard National Bank)
37. Bill Gates 58 billion (Microsoft)
38. Lawrence Joseph Ellison 58 billion (Oracle Corporation)
41. Warren Buffett 52.4 billion (Berkshire Hathaway)
43. J. Paul Getty 50.1 billion (Getty Oil Company)
44. James G. Flair 47.2 billion (Consolidated Virginia Mining Company)
45. William Weightman 46.1 billion (Merck & Company)
46. Russell Sage 45.1 billion (Western Union)
47. John Blair 45.1 billion (Union Pacific)
49. Leland Stanford 44.9 billion (Central Pacific Railroad)
50. Howard Hughes Jr. 43.4 billion (Hughes Tool Company, Hughes Aircraft et al)
51. Cyrus Curtis 43.2 billion (Curtis Publishing Company)
52. John Insley Blair 42.4 billion (Delaware, Lackawanna and Western Railroad)
53. Edward Henry Harriman 40.9 billion (Union Pacific Railroad)
54. Henry H Rogers 40.9 billion (Standard Oil Company)
55. Paul Allen 40 billion (Microsoft, Vulcan Inc.)
57. J.P. Morgan 39.8 billion (General Electric, U.S. Steel)
58. Oliver H. Payne 38.8 billion (Standard Oil Company)
60. Henry Clay Frick 37.7 billion (Carnegie Steel Company)
61. John Jacob Astor IV 37 billion (Inheritance)
62. George Pullman 35.6 billion (Pullman Company)
63. Collis Potter Huntington 34.6 billion (Central Pacific Railroad)
64. Peter Arrell Brown Widener 33.4 billion (American Tobacco Company)
65. Philip Danforth Armour 33.4 billion (Armour Refidgerator Line)
66. William S. O'brien 33.3 billion (Consolidated Virginia Mining Company)
69. James C. Flood 32.5 billion (Consolidated Virginia Mining Company)
71. Anthony Brady 31.7 billion (Brooklyn Rapid Transit)
72. Elias Hasket Derby 31.4 billion (Shipping)
73. Mark Hopkins 30.9 billion (Central Pacfic Railroad)
74. Edward Clark 30.2 billion (Singer Sewing Machine)
Note: Only Andrew Carnegie, John Jacob Astor, Stephen Girard and Alexander Turney Stewart were not born in the United States.
Outliers: The Story of Success, Pg 56-61
Many Americans will say we all were cut out of this wealth, but not as many can say that wealth was built by your own family's free labor investment. This exclusion shut them out of the middle class wealth creation in a rising America, prohibiting them from changing their labor into compounding investment their grandchildren could share for future opportunity. Slavery created a group that was left out of capitalism as a profit participant, but left in as a risk bearer (risking the greatest asset any man had, their own lives doing dangerous work). They did not sit on the sidelines in the marketplace, their labor was allowed to be in play to create other men's familial wealth that remains in the economy today. Looking more specifically at people on the list like Carnegie, who owned U.S. Steel, one of the major advantages was the ability to at times do highly labor intensive and dangerous work of steel production (mining the coal a key ingredient in steel production), with little or no labor cost. Steel production before mechanization was dangerous, and labor was key in production.
Only men of remarkable strength and endurance could stand up to the heat for hours, turn and stir the thick porridge of liquescent metal, and draw off the blobs of pasty wrought iron... Few of them lived past forty. Numerous efforts were made to mechanize the puddling furnace -- in vain. Machines could be made to stir the bath, but only the human eye and touch could separate out the solidifying decarburized metal. Anselm.edu
As covered by the Wall Street Journal in the piece "From Alabama's Past, Capitalism Teamed With Racism to Create Cruel Partnership", through Vagrancy laws U.S. Steel (the largest Company in the U.S. at the time; the first corporation in the world with a market capitalization over $1 billion), and others built cities like Alabama on the free labor of African American men that died mining coal for their steel production, under what Douglas Blackmon, author of the prior mentioned piece in the Wall Street Journal, called "Slavery by Another Name."
Under laws enacted specifically to intimidate blacks... Government officials leased falsely imprisoned blacks to small-town entrepreneurs, provincial farmers, and dozens of corporations -- including U.S. Steel Corp. -- looking for cheap and abundant labor. Armies of "free" black men labored without compensation, were repeatedly bought and sold, and were forced through beatings and physical torture to do the bidding of white masters for decades after the official abolition of American slavery. PBS- Slavery by Another Name
We as a country have started to allow our politicians to create a new view of the history of America. One in which America has been fair and free from its start, as Senator Marco Rubio so naively stated in his response to President Barack Obama's State of the Union.
"But we Americans have always known better. From our earliest days, we embraced economic liberty instead. And because we did, America remains one of the few places on earth where dreams like these even have a chance." Marco Rubio's State of the Union Reply.What is left out of this revisionist history presented by Rubio is Slavery, and the era that followed as described above. What is left out is how the value of old U.S. money compounds, and how betting old compounding investment dollars taxed at 15% on the richest country in the world has created a wealth gap few want to acknowledge no wage earnings today taxed at 40% can correct.
Economic Liberty defined: Economic freedom or economic liberty denotes the ability of members of a society to undertake economic actions free from restriction.
America, the land of the free and the home of the brave, has always been a story staunchly planted in legacy. From the old money Vanderbilts, to the new politic Kennedys, it is a story of immigrants planting themselves and creating power bases for familial success. The top of the U.S. mountain of wealth is a place of limited access, and limited space, during economic downturns that space shrinks. Over the last 30 years the wealth mountain of opportunity did not become less steep (it actually became exponentially more), instead what I believe occurred is a false mirror of credit allowed people to peek at the top and believe they were there next to the privileged. Home loans gave families with little money keys to mansions; the government gave poor kids student loans and credit cards; in the end a credit based system gave us all too much access to touch, but not own everything. As the delusional pillars of consumer credit that helped an over-crowded middle class crumble upon themselves, what will be left is a stark reality that America is not the land of opportunity that it has been portrayed as through modern media. Rather America is in fact something far different behind that veil. It is a land where the sensational story of one ball-dribbling Lebron is repeated by the media so often, it forms a shadow over the failures of all the other Lebrons that live real working class lives, all the while they look for a place to actually be able to work. America is a place where there will not even be one line for all at theme parks, even your position there will be based on class. According to a NY Times article, "At Theme Parks, a VIP Ticket to Ride" will grant you the ability to skip in front of the have-nots to the proverbial front of fun. This country has become a place a place where the slight of hand creates believers in presentation based purely on the idea that the presentation is the full story. The era that allowed for expectations to be built on credit is on its way out, and it will again be replaced with the true power of legacy in its full form.