William Greider, a prominent political journalist and author, has been a reporter for more than 35 years for newspapers, magazines and television. Over the past two decades, he has persistently challenged mainstream thinking on economics.
For 17 years Greider was the National Affairs Editor at Rolling Stone magazine, where his investigation of the defense establishment began. He is a former assistant managing editor at the Washington Post, where he worked for fifteen years as a national correspondent, editor and columnist. While at the Post, he broke the story of how David Stockman, Ronald Reagan's budget director, grew disillusioned with supply-side economics and the budget deficits that policy caused, which still burden the American economy.
He is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple and Who Will Tell The People. In the award-winning Secrets of the Temple, he offered a critique of the Federal Reserve system. Greider has also served as a correspondent for six Frontline documentaries on PBS, including "Return to Beirut," which won an Emmy in 1985.
Greider's most recent book is The Soul of Capitalism: Opening Paths to A Moral Economy. In it, he untangles the systemic mysteries of American capitalism, details its destructive collisions with society and demonstrates how people can achieve decisive influence to reform the system's structure and operating values.
Raised in Wyoming, Ohio, a suburb of Cincinnati, he graduated from Princeton University in 1958. He currently lives in Washington, DC.
Multinationals, their intellectual coverings shredded, are love-bombing labor while hunting for new fig leaves.
He and the Greens are both a problem and a possible asset for the Democrats.
Something doesn't add up about the new Treasury Secretary nominated by George W. Bush. The supply-side conservatives who live for more big tax cuts on capital and upper-bracket incomes are actively leery about Alcoa chairman Paul O'Neill. Some grumble that he may be a talented corporate manager but that he's ill equipped for the top economic post in the Bush Administration. Meanwhile, George Becker, president of the Steelworkers union, loves the O'Neill selection. "I'm not an economist, I just go on gut beliefs," Becker said. "But Paul is a person working people and labor people can talk to. He is an industrialist who believes in the United States and has maintained a strong industrial base in the United States. I think this is far better than having another bond trader in that job."
Bush's choice has startled many quarters, including Wall Street, because O'Neill comes to the job from old-line manufacturing and with a reputation for independent thinking, albeit in the moderate Republican manner. Above all, he is not a banker or financier--the first Treasury Secretary since the Carter Administration to originate from the business realm that actually makes things (aluminum, in O'Neill's case). Yet, oddly enough, O'Neill is also a government pro. He spent sixteen years as a systems analyst and budget economist in the federal government, rising to deputy director of the Office of Management and Budget under Gerald Ford, before a brilliant business career at International Paper and Alcoa (both multinational companies are reviled by environmentalists--he's not Ben & Jerry's). But unlike the laissez-faire crowd, O'Neill understands the power of activist government to intervene in the private economy and has demonstrated a taste for doing so. At a minimum, he represents a refreshing shift from the free-market mantra that has ruled at Treasury for the past two decades.
"I negotiated with Paul for years--he's very tough but fair--and we've always been able to get a fair, decent contract," said Becker, whose union represents 22,000 Alcoa workers. "I had people I could talk to in the Clinton Administration too. They would listen and tell me how much they understand our pain. Then they went out and deep-sixed us. I like [former Treasury Secretary] Bob Rubin, but Rubin killed us in steel. He would say, Let the marketplace decide. Except, when financial firms got in trouble, they went to the rescue."
In contrast, as a business executive, Paul O'Neill artfully engineered a worldwide rescue for the aluminum industry and persuaded President Clinton to make it happen. Prices were collapsing in 1993 because the former Soviet republics were flooding the world market with cheap aluminum--devastating US producers like Alcoa. The temporary agreement amounted to a government-negotiated cartel--every producing nation reduced its output to prop up world prices--and it worked. Yet the political deal was done so skillfully that few in the media even noticed. And nobody complained about the scheme's contradicting Clinton's free-trade rhetoric. O'Neill knows where the levers are located and how to pull them.
While it would be nice to imagine that the Bush/Cheney team is sending a message about new ideological priorities with this appointment, their motivation is probably more pedestrian--personal trust, not policy. O'Neill comes from the same "old boy" circle of policy advisers that includes Dick Cheney, Donald Rumsfeld and, yes, Alan Greenspan during the Nixon/Ford years. He is a familiar old friend to all of them, experienced and capable, above all loyal. During George Bush Senior's ill-fated presidency, O'Neill took Alcoa out of the US Chamber of Commerce in order to endorse Bush's deficit-reducing tax increase--the one that got the President into permanent trouble with the party's right-wingers. Around the same time O'Neill proposed a $10-a-barrel tax on oil to force greater energy conservation. He supported Bill Clinton's more modest energy-tax proposal, which failed in 1993. He is quite willing, in other words, to break eggs over the GOP's antitax doctrine.
In another season, these qualities would have made for intriguing possibilities, but O'Neill's strongest asset--he's not from Wall Street--might also become a handicap in present circumstances, because the Bush Administration is assuming power amid a breaking storm--the collapsing stock-market bubble and deteriorating economic growth worldwide. Whether this event turns out to be good luck for Dubya or the ruination of his presidency will depend crucially on the smarts of O'Neill and a team of White House economic advisers that includes former Federal Reserve governor Lawrence Lindsey as principal counselor and, presumably, Stanford economist John Taylor at the Council of Economic Advisers. The old boys from business and finance gathered at the governor's mansion in Texas to throw in their advice, a private conversation that did not include the press and public.
The problem is that none of Bush's lead advisers have displayed any special feel for financial markets--especially markets that are scared and imploding. The conservative financial experts I talked with all delivered the same warning. "O'Neill needs to have a serious banker at his side, someone who has done a lot of financial restructurings and bankruptcies," one of them said. "Because that's what is coming."
O'Neill has been relieved of an obvious first challenge--coaxing the Fed chairman into cutting interest rates--because that job was done for him by the frightened financial markets. Falling stock prices and market interest rates, along with plummeting sales and production, delivered a message of terror--the markets' fear that Greenspan was dangerously behind events. He was thus compelled to start cutting rates. Many market players figure it's already too late, however, and Greenspan's wizard status is swiftly evaporating, at least among those who understand what's happening. So Bush's team will begin by blaming Clinton/Gore for the rising unemployment and corporate bankruptcies, while privately nudging Greenspan to keep on easing credit terms. A deep distrust toward Greenspan lingers in the Bush family--a sense that he broke promises and allowed high unemployment to linger much too long after the 1991 recession, effectively dooming George père's re-election campaign in 1992. This time, they will not wait passively on the chairman's wisdom, and Bush Jr. has real leverage he can apply. The seven-member Federal Reserve Board has two vacancies and a third one expected. The White House can surround Greenspan at the boardroom table by appointing friendly critics and even a possible successor.
A recession that comes early in a new President's term--and is over well before he's up for re-election--can wind up as smart political timing, but Bush may lose his Congressional majority in the process. While Ronald Reagan enacted a radical conservative agenda during his first year in office, his popularity sank as the ugly recession worsened; Democrats picked up twenty-seven House seats in the off-year election of 1982. By 1984, however, it was "morning again in America," and the Gipper won in a landslide. If Bush's advisers are as shrewd as they appear, they will push hard for their big ideas up front and, meanwhile, do whatever they must to reverse the economic bloodletting.
The more ominous possibility facing the Bush presidency is that given neglected realities inherited from the Clinton years, this downturn could renew globalized financial crisis in Asia, Latin America or elsewhere. Only this one could not be blamed on "crony capitalism" or other establishment canards. The $360-billion-a-year trade deficit in the United States has kept Japan and many developing countries afloat in recent years, though a long way from genuine recovery. If the United States becomes mired in recession, Americans will buy far fewer imports, and that will reignite financial failures in the exporting nations. Their panic can flow right back into the US financial system, with banks and brokerages demanding another round of IMF bailouts. O'Neill and company may find themselves standing in a circle of bonfires.
The specter of bad times coming does, of course, add momentum for major tax-cutting legislation--a centerpiece in Dubya's campaign--but it's not obvious how Bush's retrograde measure would actually help the economy (40 percent goes to the very wealthy, as that fellow Gore kept reminding us). Some elements, like abolishing the inheritance tax, may even generate drag on economic activity. The Bush team talks like conservative Keynesians, but in the real world, economic stimulus requires steeply progressive tax cuts--putting money in the hands of people who will promptly spend it. That means quick rate cuts or temporary tax credits that skip over the upper brackets for a change and deliver the money to the bottom half of the income ladder. Democrats are wrong-footed by events too. After several years of indulging in Coolidge-Hoover pieties about paying down the national debt, Democrats must scurry now to come up with a progressive--don't say liberal--tax-cutting proposal of their own. Clintonism is over, and they had better shake out the cobwebs quickly, because their choices on who needs tax relief and who doesn't will define them for the 2002 election and beyond.
The essential handicap in using fiscal policy to restart the economy (one that has always burdened Keynesian economics) is the problem of timing. In the best circumstances, it can take six or eight months to enact a major stimulus package, and even if the tax cuts are postdated to January 1, the money arrives too late to stanch the contraction. If Democrats are alert and public-spirited, they will propose a quick, emergency reduction in paycheck deductions with a commitment to support a second, broader tax measure later in the year. They should also call for stand-still protection for those working people drowning in debts who lose their jobs--a temporary safety net that keeps them out of bankruptcy until the economy revives. These and other measures are, of course, way beyond the present imagination of either party. More likely, the tax bill will turn into a special-interest bidding war in which both parties compete to pay back their accumulated obligations to lobbyists and contributors.
The new Republican majority, already frail and dubious, has been taken hostage by these economic portents even before it assumes power. A "normal" recession of brief duration might be manageable. A longer, more profound unwinding will shake the foundations of Republicans and Democrats alike.
Bill Clinton is moving to install Terry McAuliffe as the head of the DNC, a cynical move in this day of pay-to-play politics.
But as the bankers know, he loves some of us more than others.
This election may jolt Americans out of a passive acceptance of civil mythologies.
In the final triumph of free-market capitalism, farmers will become serfs.
If politics got real...the debate over costly prescription drugs would turn to more fundamental solutions like breaking up the pharmaceutical industry's patent monopolies, which generate soaring drug prices, and rewarding consumers for the billions of tax dollars spent to develop new medicines. As a business proposition, that sounds radical, but it would actually eliminate outrageous profit-skimming at taxpayers' expense and liberate lifesaving medicines from inflated prices so millions of people worldwide could afford the health benefits.
At present, the government picks up the bill for nearly all basic research and development, mainly through the National Institutes of Health. Then private industry spends about $25 billion a year on more R&D--essentially taking NIH discoveries the rest of the way to market. The companies mostly do the clinical testing of new compounds for safety and effectiveness, then win regulatory approval for the new applications. This is one instance where a bigger role for government, by taking charge of the scandalous pricing system, could produce vast savings for the public--as much as $50 billion to $75 billion a year.
The National Institutes of Health and independent scientists working with NIH grants generally do the hard part and take the biggest risks, yet there is no system for sharing the drug companies' subsequent profits with the public treasury or for setting moderate prices that don't gouge consumers. Instead, the drug industry reaps revenues of $106 billion a year, claiming that it needs its extraordinary profit levels in order to invest heavily in research. The companies are granted exclusive patents on new products for seventeen years (or longer if drug-company lobbyists persuade Congress to extend them). Meanwhile, the manufacturers collect royalties (and less profit) on the very same drugs under licensing agreements with Europe, Canada and other advanced nations where the governments do impose price limits. Thus, Americans pay the inflated prices for new medicines their own tax dollars helped to discover--while foreign consumers get the break.
Years ago, although reform was mandated by law, NIH abandoned its efforts to work out a system for moderating US drug prices--mainly because the industry refused to cooperate and had the muscle in Congress to get away with it. Now that soaring prices have inflamed public opinion again, Dean Baker of the Center for Economic and Policy Research proposes a more radical solution. NIH should be given control over all drug-research policy, Baker suggests, and Congress should put up public money to cover the industry's spending (probably less than $25 billion because marketing costs get mixed into the research budgets as well as money spent to develop copycat drugs, which are medically unimportant). The exclusive patent system would be phased out, perhaps starting with cancer drugs and other desperately needed medicines whose prices are too high for poor nations to afford. For $25 billion or less in new public spending, brand-name drugs would largely disappear, but, Baker estimates, prescription costs for Americans would shrink by as much as 75 percent overall.
A less drastic solution, suggested by James Love of Ralph Nader's Consumer Project on Technology, would limit use of exclusive patent rights and, if needed, compel drug-makers to grant royalty licenses to other US companies to make and sell the same medicines, thus fostering price competition. Competing companies would be required to contribute a minimum percentage of revenues to R&D to maintain research spending levels. The government could also require companies to help fund government or university research.
The prescription-drug debate of Election 2000 is a long way from either of these visions for reform, but events may lead the public to take them seriously. Drug prices are inflating enormously. If Congress fails to make it legal, the bootlegging of cheaper medicines from Canada and other countries where the prices are controlled is bound to escalate, and the present system might break down from its own lopsided design. As a matter of public values, the discovery of new health-enhancing medicines ought to be shared as widely--and inexpensively--as possible, especially since public money helped pave the way to these discoveries. Jonas Salk never sought to patent his polio vaccine. He thought his reward was knowing how greatly his work had advanced all of humanity.
The old politics of oil has resurfaced to add a nervous flutter to Election 2000 and also to revive an enduring question of modern industrial life--what is the right price for oil? The media's New Economy cheerleaders scolded Clinton/Gore for tampering with the answer, but those pundits are under an illusion that the market, not governments and international politics, determines the price of crude oil. Their rage at Clinton for unleashing a little extra crude from the government's strategic reserve is an amusing non sequitur. For the past thirty years, the world price of oil has been "managed" by governments, albeit with haphazard results. The price was maintained by the OPEC cartel of oil-producing nations, with discreet consultations from the United States and other industrial powers. Before OPEC, the world price of oil had been managed since the thirties by the fabled Seven Sisters, global oil corporations that still have an influential voice in the conversations. Oil-price diplomacy, for obvious reasons, is mostly done in deep privacy.
Indeed, Riyadh and Washington are at this moment attempting once again to get the price right, that is, to steer crude oil back down to a mutually acceptable zone, centered on $25 a barrel. That's what Saudi Arabia, the largest producer, says it wants--a target range between $22 and $28 a barrel--and what Bill Clinton has called "a reasonable range" acceptable to Washington. Oil at $25 a barrel would be a lot cheaper than the recent peak of $38, but also a lot higher than the $10 bottom that oil hit in 1998, when prices were severely depressed by collapsing demand triggered by the Asian financial crisis the year before. Splitting the difference is a better solution than continued crisis, especially for Europe, because stability helps sustain everyone's economic growth.
So is $25 the right price? Maybe not. Because $25 is still cheap oil--too cheap to allow the producer nations to recapture their massive revenue losses and possibly too cheap to force US consumers and companies to undertake serious, self-interested industrial conversions away from petroleum. Since oil is traded worldwide in dollars, its real price declines automatically from US inflation. Thus, measured in constant dollars, $25 oil is really only about $13 in historical terms--right where it was in the mid-seventies. This level would be modestly above the average real price of the past fifteen years but still far below what OPEC initially gained after its two dramatic spikes in the seventies. Because of the interaction of currency values, Europe is taking a much more severe hit this time. The euro is down and the dollar is strong, so the real price of imported oil is much higher for European economies.
Texas oil guy George W. Bush is making the same retrograde noises Republicans always make--Drill for more oil! Open up the Alaskan wilderness! Drill offshore! Whatever! Bush's nostalgic notion that the United States can drill its way out of its petroleum problem is out of touch by about twenty-five years. The world isn't running out of oil--the undiscovered reserves are probably good for another century--but the United States is running out of its own oil. The proposition that we should pump and burn our remaining reserves first is completely backward, both as energy policy and for long-term national security. Al Gore, in his best moments, understands all this and has long championed a fundamental shift to alternative fuels, but he has lacked the courage to force the issue. The Clinton Administration provided gorgeous subsidies to the Big Three auto companies to develop electric cars and then allowed the industry to backslide by not increasing the government's fuel-efficiency requirements. Maybe the price crisis will prompt Gore to reread Earth in the Balance.
Oil politics is many-layered and so paradoxical that public opinion is not only confused but frequently led in the wrong direction. "Bad news" may actually be good news; the "villains" are sometimes actually victims. In real terms, OPEC's oil revenues peaked two decades ago--$493 billion in 1980 (in 1990 dollars)--and have declined unevenly since then. OPEC's oil income hit bottom in 1998, at $80 billion in real terms. So they regard the recent price run-up as a justifiable attempt to get well, to recover some of their losses. It's hard to muster much sympathy for oil potentates, but their national budgets have been severely squeezed--especially Saudi Arabia's, which absorbs more than its share of the production cutbacks because that country is the biggest and least aggressive player.
OPEC, on the other hand, has been a clumsy, hapless manager of world oil prices. Twice, it wrong-footed emerging economic conditions by increasing production just as global demand was about to swoon--inadvertently feeding the severe price collapses in 1986 and 1997. This time, they overshot again but on the upside --cutting oil supply just as the world's economies were gaining momentum. With the rising demand, prices were driven higher than the Saudis, at least, intended. Among the present dangers, the tight supply still threatens to stall out economic growth, especially for Europe, and it also gives temporary leverage to Iraq. If Iraq were to halt its exports, prices might soar again, just as Saudi Arabia and the United States are pulling in the opposite direction.
But here's some good news. Extreme price gyrations in oil promote fundamental change in US industrial structure. The seventies stimulated major shifts toward energy conservation and persuaded some sectors, like electrical generation, to decouple entirely from the vulnerability of unpredictable price shocks. Electric companies converted to natural gas and other fuels so that a major US user of petroleum was permanently lost as a market for OPEC exporters. Some authorities think this new mini-crisis is likely to encourage similar movements, especially in transportation. The auto industry, for instance, has toyed for years with available technologies like fuel cells, which liberate cars from oil, but they never moved seriously. Now Japanese manufacturers are making electric hybrids with far greater fuel efficiency. In other words, if high oil prices linger awhile, the permanent market for oil might shrink. Detroit could once again lose market share to Japan, but Americans and the environment would benefit enormously.
Sheik Ahmed Zaki Yamani, Saudi Arabia's former oil minister and a founding architect of OPEC, already fears this--another round of innovations that drastically reduce gasoline and oil consumption. "Technology is a real enemy for OPEC," Yamani warned in a Reuters interview. "Technology will reduce consumption and increase production from areas outside OPEC. The real victims will be countries like Saudi Arabia with huge reserves which they can do nothing with--the oil will stay in the ground forever."
OPEC, the sheik predicted, "will pay a very heavy price for not acting in 1999 to control oil prices. Now it is too late. The Stone Age came to an end not for a lack of stones, and the oil age will end, but not for a lack of oil." His forecast may be a bit premature, but it's a lot more cheerful than the oil chatter in American politics.
Paying off the national debt used to be an obsession of Calvinist
fundamentalists on the fringes of the Republican Party, but this year it
is the boldest banner held aloft by the Democratic Par