poorer neighborhoods into desirable real estate for the new elites
often requires getting rid of the poor: jail becomes the new home for
November 25, 2013
is it that our land, supposedly the beacon of freedom and democracy for
the rest of the world, puts so many of its own people into prison?
usually attribute the prisoner increase to a combination of overt
racism and Nixon's war on drugs, followed by Rockefeller's "three
strikes" legislation in New York, and then the 1984 Sentencing Reform
Act with its mandatory sentences. While racism and these laws certainly
provide ample opportunity to incarcerate millions for violating
senseless prohibition laws, they do not tell the whole story.
was just as virulent, if not more so, long before the dramatic rise in
prisoners set in during the 1980s and 1990s. Just because there are
draconian laws on the books, it doesn't explain why they are so
dutifully enforced. It also doesn't explain why so many are willing to
risk prison, knowing the increasing odds of getting caught.
we dig deeper, we'll see that the rise in incarceration corresponds
with the rise of financialization and the dramatic increase in Wall
Street incomes. Of course, just because trend lines on charts rise and
fall together doesn't mean one causes the other. But this correspondence
is much more than coincidence.
fact, we could show you a dozen other trends lines about
financialization, wealth and the rising incomes of America's elites that
follow the same patterns over similar years as the incarceration rate.
What is the connection?
'Unleashing' Wall Street destroys manufacturing, older urban areas and black America's upward mobility
the end of the 1970s, our policy establishment embarked upon a new
experiment to shock the nation out of stagflation (the crushing
combination of high unemployment and high inflation). To do so,
neo-liberal economists successfully argued that Wall Street should be
deregulated and that taxes on the wealthy should be cut to spur new
entrepreneurial activity that would enrich us all.
activity certainly increased, and with a vengeance. Rather than create
new jobs and industries that would promote shared prosperity, a new and
invigorated Wall Street set about to devastate American manufacturing.
Its goal was, and still is, to make money from money, not to make money
by producing tangible goods and services. Wall Street's main product for
America is debt. And its profits derive from loading up the country
with it, and then collecting compound interest.
after wave of financial corporate raiders (now politely called private
equity firms) swooped in to suck the cash flow out of healthy
manufacturing facilities. Wall Street, freed from its New Deal shackles,
loaded companies up with debt, cut R&D, raided pension funds,
slashed wages and benefits, and decimated well-paying jobs in the U.S.
while shipping many abroad. The released cash flow was used to pay back
the financiers, buy up stock to drive up its price, and pay out
dividends. Nearly half the raided companies failed as America's
heartland in a few short years turned into the Rust Belt.
But Wall Street prospered as its profits rose to account for nearly 40% of all corporate profits
by 2003, up from less than 10 percent in 1982 (It would take more
space than we have here to explain why this had little to do with
"unfair" foreign competition. We could also show that so called
free-trade agreements were designed by financiers to promote their
interests, not ours.)
The catastrophic collapse in
manufacturing jobs was particularly tragic for black Americans who
during the first two decades after WWII had seen their standard of
living rise as they entered higher paying industries. As the Wall Street
vultures sucked the life out of these industries, black Americans found
themselves in dying urban areas where the next best jobs paid less than
half what manufacturing once paid. If lucky, young minority men and
women could find work in the public sector which still was unionized.
More typically, scarce jobs might be found in fast-food chains, box
stores, warehouses, and in the lower ranks of the healthcare system.
Overall, however, unemployment rates soared, especially for minority
youth. Participation in the underground economy often became the only
means of survival.
Financialization, gentrification and the removal of low-income residents
only does financialization destroy middle-income manufacturing jobs in
urban areas, but the process also removes low-income neighborhoods
through gentrification. The rise of high-income financiers (and the
desire of banks to loan more money to them) creates upward pressure on
housing prices in urban areas that cater to elites, like New York,
Chicago and San Francisco. As land values rise rapidly, lower-income
residents are squeezed out of their neighborhoods, which are revamped
into fashionable townhouses and apartments for the wealthy. (Typically,
the children of the well-to-do unconsciously serve as forward troops as
they flock into lower-income areas in major cities, seeking to support
themselves as artists and young professionals.)
hundreds of neighborhoods are transformed, higher income residents
require more protection from the alternative low-income economy, called
"crime in the streets." As mayors cater to these new elites, police
patrols increase and incarceration rises through "stop and frisk"
programs which invariably target minorities.
put, for financial interests to transform poorer neighborhoods into
desirable real estate for the new elites, it is necessary to get rid of
the poor. Jail becomes the new home for many.
housing bubble and bust further destroyed lower income neighborhoods and
decent-paying public sector jobs. Not only did financial interests
feast upon productive firms, but they thrived on consumer debt (yet
another chart that mirrors the incarceration rate).
housing bubble, which was entirely engineered by Wall Street, created
enormous demand for junk mortgages to package into securities which then
turned toxic. When the bubble burst, the biggest losers were
lower-income homeowners who thought they had finally gotten a piece of
the American dream. With declining housing prices they found themselves
underwater and/or living in neighborhoods with hundreds of abandoned
homes. Their debts, remained, while, as we all know, the richest of the
rich were bailed out.
Because of the Wall Street
crash, revenue-starved urban areas in the Rust Belt were hit once again.
With unemployment higher than anytime since the Great Depression,
business and worker tax revenues fell, leading to cuts in public
employee jobs and benefits—the very jobs middle-income minorities were
fortunate to find as manufacturing declined over the previous decades.
became the poster child for the ravages brought about by
financialization. First corporate raiders and private equity firms
squeezed the life out of manufacturing all over Michigan. Then the Wall
Street crash destroyed more jobs and undermined the tax base, leading to
urban bankruptcy and more job loss in the public sector.
Wall Street's Jobs Program: Incarceration
will happen to all those unemployed, given the massive shortfall in
jobs? What will happen to those trapped in neighborhoods crammed with
foreclosed homes? Where is the jobs program for the millions who need
has the answer that is now the de-facto government policy—put the
dislocated, the unemployed, the "surplus" youth in jail.
because financial interests and their crony politicians have no
interest at all in traditional jobs programs that could put millions of
young people to work. Instead, they are doing all they can to bring
austerity policies to America. The less government spends on public
services and safety net programs, the more money it has to support Wall
Street. As government services are cut, state and local governments must
turn even more to Wall Street in order to finance infrastructure
projects (where the total cost including interest payments is usually
several times the initial costs of construction).
Street's super-profits can only continue if public and consumer funds
are transferred to high finance via interest payments on loans. So
public jobs programs are out of the question, and both parties have been
"convinced" (with campaign contributions) that we can't afford them.
that leaves us with one and only one jobs program—incarceration—which
is also a growth opportunity for Wall Street. As public revenues falter,
pressure will mount to privatize more and more correctional facilities
and law enforcement functions, opening up lucrative opportunities for
more privatization and more Wall Street loans to make it happen.
by all means, let's legalize drugs, get rid of mandatory sentencing and
prohibit "stop and frisk." But until we tackle financialization and its
destruction of neighborhoods and jobs, we will channel another
generation into the underground economy—and into jail.
These four graphs tell the tale visually -- click to enlarge each:
1. The soaring American prison population since 1920:
2. Where the money is going: financial sector vs. non-financial sector yearly compensation:
3. The total collapse of manufacturing jobs in America since 1960:
4. Unemployment levels since 2007:
5. The staggering rise of household debt -- home mortgages and credit debt:
Post a Comment