- Signs of the Times for Mon, 05 Jun 2006 -

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Gold closed at 643.00 dollars an ounce on Friday, down 1.6% from $653.30 at the previous Friday's close. The dollar closed at 0.7741 euros on Friday, down 1.5% from 0.7860 at the end of the previous week. That put the euro at 1.2918 dollars, compared to 1.2722 at the end of the week before. Gold in euros, then, would be 497.99 euros an ounce, down 3.1% from 513.52 for the week. Oil closed at 72.75 dollars an ounce on Friday, up 1.9% from $71.38 for the week. Oil in euros would be 56.32 euros a barrel, up 0.4% from 56.11 at the end of the week before. The gold/oil ratio closed at 8.84 on Friday, down 3.5% from 9.15 at the previous week's close. In the U.S. stock market, the Dow closed at 11,247.87 on Friday, down 0.3% from 11,278.61 for the week. The NASDAQ closed at 2,219.41, up 0.4% from 2,210.37 at the end of the week before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.99%, down six basis points from 5.05 for the week.

Last week we looked at the trial of Enron executives Jeffrey Skilling and Kenneth Lay and how Enron really is an emblem of U.S. corporate capitalism. Joe Kay of the World Socialist Web Site expanded on this topic Monday:

The Enron verdicts: corruption and American capitalism

By Joe Kay
29 May 2006

The guilty verdicts handed down by a Houston jury last week against former Enron chiefs Kenneth Lay and Jeffrey Skilling provide an opportunity to evaluate the significance of the company's rise and fall within the context of American capitalism.

Accounts by jurors given after the verdicts were announced indicate they all agreed that the evidence against the two executives was overwhelming. It consisted mainly of testimony from over a dozen former executives, who implicated Lay and Skilling for their roles in defrauding investors and employees through various forms of accounting manipulation. The jurors quickly rejected the absurd position of the defense that Enron was basically a healthy company that collapsed into bankruptcy in December 2001 largely as the result of Wall Street machinations and negative press coverage.

Several jurors indicated they reacted negatively to the testimony of the defendants, and particularly Lay, who could not hide his arrogance while on the stand. Others said Lay's move to sell millions of dollars of company stock in the months before the bankruptcy, even as he encouraged employees to keep buying, was appalling.

One juror noted, "That was very much the character of the person that he was. He cashed out before the employees did." Some jurors spoke about social conditions in the US, voicing the hope that the verdicts would send a message to other executives across the country.

There is certainly an element of social protest here, directed both at Enron and the broader conditions of inequality and corporate greed, whatever limitations there might be in the jurors' understanding of the underlying forces at work. The conviction of Lay and Skilling stems ultimately from the fact that they headed a company that engaged in market manipulations and fraud which, in their scale and flagrancy, exceeded anything that had gone before in a long history of corrupt business practices. And Enron has since been shown to have been only one of many companies that engaged in similar practices.

It is by no means assured that the two executives will spend significant time in prison, though commentators have generally agreed that the legal bases for their appeals are very limited. But, as one juror suggested, money has a way of solving such problems.

There are additional factors at work - in particular, the close political connections that Lay and Skilling have with the political establishment in general and the Bush administration in particular. Lay, after all, was for a long time one of Bush's most important political supporters. He is certainly in possession of important information that could be damaging to powerful people. (For example, what exactly was discussed during Cheney's secret Energy Task Force meetings, in which Enron took part?).

One would suppose that Lay still has a few aces up his sleeve, as well as friends in high places. A presidential pardon - no doubt as a reward for philanthropic good works - is not out of the question.

The verdict has predictably been followed by self-congratulatory comments from sections of the media and the government prosecutors: the convictions demonstrate that the system works, that nobody is above the law, that all misdeeds will eventually be punished, etc., etc. The Wall Street Journal published an editorial along these lines Friday, voicing the arguments that finance capital has made after every one of the major trials involving corporate corruption. It concluded with the claim that "assertions of widespread corporate fraud back in 2001 and 2002 were way overblown."

Following the verdict, Sean Berkowitz, the head of the government's Enron Task Force, said that it "sent an unmistakable message to boardrooms across the country - you can't lie to shareholders. You can't put yourself in front of your employees' interests." This under conditions where it remains common practice for executives to award themselves multi-million dollar salaries even as they carry out mass layoffs!

Other commentators have been more penetrating, noting that not only was the "Enron phenomenon" widespread, but that the same problems persist today. Kurt Eichenwald, in an article for the New York Times on Friday, wrote that Enron "will forever stand as the ultimate reflection of an era of near madness in finance, a time in the late 1990s when self-certitude and spin became a substitute for financial analysis and coherent business models."

The ultimate lesson of Enron, Eichenwald suggested, is the picture it presents of "a corporate culture poisoned by hubris, leading ultimately to a recklessness that placed the business's survival at risk."

The Times' business commentator, Gretchen Morgenson, entitled her Sunday article "Are Enrons Bustin' Out All Over?" and cited recent cases of corporate fraud, particularly that of housing lender Fannie Mae.

Lawyers for Lay and Skilling were close to the truth when they argued that the prosecution's logic implied the criminalization of standard business practices (and therefore their defendants should not be convicted for doing what every one else was doing). Skilling's lawyer Dan Petrocelli stated in his closing arguments that if the jury accepted the government's case, "we might as well put every CEO in jail."

Certain conclusions may legitimately be drawn from this statement that Mr. Petrocelli never intended.

However, even the more probing comments in the media miss the central lesson: that Enron and the corporate environment which created it were the products of basic tendencies of American capitalist development. They were the outcome of a political and social policy that has been pursued by both big business parties - a policy that has encouraged greed, corruption and criminality as part of a ruthless drive to attack the living standards and social gains of American workers.

Beginning particularly in the 1980s, the American ruling elite responded to the economic crisis of the previous decade by shifting the way businesses operate. Greater competition from Europe and Asia had begun to cut into the American ruling class' status as hegemon of the world capitalist system. From the standpoint of the social position of Wall Street and corporate America, it became necessary to eliminate concessions granted to workers in an earlier period.

Deregulation, the attack on higher-quality jobs, the elimination of social programs - these were all part of a policy aimed at redistributing wealth from the bottom to the top, cutting into the share allocated to the actual producers of this wealth. Big Wall Street investors began placing ever-greater demands on corporate management to return quick profits, often by means of wage cuts and downsizing. The measure of corporate success increasingly became short-term earnings, closely linked to the fluctuations in a company's stock.

As the World Socialist Web Site noted shortly after Enron's collapse, the operations of the stock market have become central to the functioning of the world capitalist economy. "Every day trillions of dollars course through global equity, currency and financial markets in the search for profit. Since the start of the 1980s as much as 75 percent of the total return on investments has resulted from capital gains arising from an appreciation of market values, rather than from profits and interest. In this drive for shareholder value, each corporation is compelled, on pain of extinction, to devise measures which attract investment funds by lifting the price of securities above that which would be justified by an objective valuation of the underlying assets." (See "Enron: The real face of the 'new economy'")

The interests of executives were tied in with the interests of Wall Street through a variety of mechanisms - in particular, the increased use of such forms of compensation as stock options. Executives who managed to keep their stock prices high were, and continue to be, richly rewarded.

While originally developed as part of the drive to increase productivity and cut costs in response to the economic problems of American capitalism, financial speculation has inevitably taken on a life of its own. To keep stock prices high, companies have resorted to all sorts of operations - including fraud and accounting manipulations.

Such considerations as the long-term health of the company have increasingly taken a back seat to the need to satisfy Wall Street's demands for ever-rising short-term earnings. It has been widely acknowledged by executives themselves that they often make decisions contrary to the longer-term interests of their own corporations.

The process was a means of generating vast, previously unheard of fortunes, particularly during the late 1990s. That half-decade saw an explosion of social inequality. Some people made lots of money, and companies like Enron were essential to this process of wealth redistribution.

A new social type was created in the process, one that calls to mind Marx's description of the French finance aristocracy before the revolution of 1848, in which "the mania to get rich was repeated in every sphere... to get rich not by production, but by pocketing the already available wealth of others."

In words that could apply just as well to the likes of Skilling and Lay, Marx wrote: "Clashing every moment with the bourgeois laws themselves, an unbridled assertion of unhealthy and dissolute appetites manifested itself, particularly at the top of bourgeois society - lusts wherein wealth derived from gambling naturally seeks its satisfaction, where pleasure becomes debauched, where money, filth and blood commingle."

Enron combined within itself the basic features of a new type of American business operation. It was a company whose operations did not, for the most part, involve the production of anything of value. Enron exploited the deregulation of the energy markets to insert itself as a middleman, siphoning off revenues at the expense of consumers and speculating on energy prices. Skilling considered one of his and Enron's greatest accomplishments the virtually single-handed creation of the wholesale energy market, which during the late '90s became a new means of speculation and price-gouging.

All of the various components of American capitalism were involved in the operation: Wall Street investors and analysts, who bought and boosted Enron stock; investment banks, which provided loans and helped Enron cover up its losses; the media, which perpetuated the myth that companies like Enron and executives like Lay and Skilling were representatives of a new, vibrant and productive stage of capitalism.

Enron personified the new social layer in which "money, filth and blood commingle." One need only recall the tapes recording the gloating of Enron energy traders over the California energy crisis of 2001, a crisis caused to a considerable degree by Enron's own market manipulations. (They joked about gouging money from "those poor grandmothers in California.")

Or the shooting death in January 2002 of former Enron vice chairman J. Clifford Baxter, who had opposed to some extent the high-handed methods at Enron and was, at the time of his extraordinarily timely suicide, due to testify in various investigations into the collapse of the company. (See "The strange and convenient death of J. Clifford Baxter - Enron executive found shot to death")

The consequences for ordinary Americans (and not just Americans, since Enron and companies like it operate and have interests all over the world) have been devastating, and have been particularly felt since the stock market collapse of 2001: the decline in living standards, increasing indebtedness, a relentless assault on decent-paying jobs and benefits. The increased exploitation of working people has been a critical part of the drive to maintain and expand the wealth of a tiny oligarchy. When the companies mired in corruption collapsed, jobs and retirement savings were eliminated overnight.

None of these conditions has been eliminated. The drive to reduce wages, cut health care and pension programs and eliminate regulations on business has, in fact, intensified.

Recent revelations of the widespread practice of backdating stock options (to ensure the largest possible gains for executives) demonstrate that corruption persists. The stock market and financial manipulations play as important and damaging a role today as they did five years ago. In the event of another stock market collapse, which is inevitable given the precarious world economic situation, a host of new Enrons will be exposed.

Largely ignored in the mass of media reportage on the Enron verdicts is the intimate political connection between Lay and George W. Bush. Lay was one of Bush's key backers from Bush's early political career in Texas until Enron went bankrupt, after Bush had become president. Former Enron executives took up posts in the Bush administration, and Lay exercised veto power over an important position dealing with energy regulation. At the Enron CEO's request, one candidate was ditched in favor of another hand-picked by Lay.

Enron also played a critical role in the formulation of the Bush administration's energy policy and plans for war in Iraq, through participation in Vice President Cheney's secret Energy Task Force. And while Enron was price-gouging and restricting energy supplies in California, costing residents of the state billions of dollars, the Bush administration refused to intervene and impose price caps, despite repeated requests from the state government.

In view of the scale of the scandal and the obvious political connections, the political fallout has been remarkably negligible. But then again, the nominal opposition party is thoroughly complicit in promoting the network of social relations that produced Enron. The company's rise, and the vast growth of speculation and inequality, took place mainly during the administration of Bill Clinton. It would be difficult, if not impossible, to point to one instance in which the Democratic president raised criticisms of the company while it was making money for Wall Street and the American ruling class as a whole.

The conviction of Lay and Skilling will, in the end, do nothing to address the more fundamental issues confronting working people. Even if the two do go to jail for a significant period of time, the outcome provides cold comfort to the thousands of workers who have lost their jobs and savings. The wealthy who profited from Enron can write off their subsequent losses and move on to the next speculative money-making scheme. The situation is altogether different for ordinary working people.

The government felt compelled to bring the case because of the public outcry that followed the revelations of massive corruption. There was, and still is, great concern within ruling circles that such crimes could become a focus for broader social grievances, and that outrage could take on more overtly political forms.
Lay and Skilling are guilty of crimes, but they are not limited to the particular instances of fraud committed at Enron. They are an expression and outgrowth of broader social crimes. The guilt of Kenneth Lay and Jeffrey Skilling is the guilt of American capitalism.

In a connected, but little-noticed act, Bush granted ghoulish intelligence chief John Negroponte the power to grant corporations the right to conceal financial information from public scrutiny if there is some connection with "national security."

The Circle of Greed: The Cloak of Invisibility

by Mark Faulk

"Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence."

While just today, Enron executives Ken Lay and Jeffery Skilling have been convicted of conspiracy, fraud, insider trading and making false statements in deceiving their shareholders and employees, and while advocates for stock market reform continue to call for more transparency in our financial system, the federal government continued to opt instead for invisibility, granting intelligence czar John Negroponte the authority to "exempt companies from certain critical legal obligations. These obligations include keeping accurate 'books, records, and accounts' and maintaining 'a system of internal accounting controls sufficient' to ensure the propriety of financial transactions and the preparation of financial statements in compliance with 'generally accepted accounting principles.'"

President Bush, and in fact, every president since Carter, has had the authority to allow publicly-traded companies to be exempt from the Securities Exchange Act of 1934, purportedly to hide information about top-secret defense contracts. How many times has the exemption been used? Who knows? The administration isn't telling, and since the companies who are exempt don't have to "keep accurate books, records, and accounts," there is no way to know whether any...or whether all...defense contractors, or even companies who are loosely-related to defense spending, are playing by the rules. It is effectively a corporate cloak of invisibility.

And with these ambiguous words: "Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence," President Bush passed on the absolute authority to exempt whatever companies he deemed worthy of being above the law to Negroponte.

Want to know whether Halliburton's financial records are accurate, or even if they're required to keep records at all? Sorry, the administration won't tell you that. Wonder if Boeing or Lockheed, or any of a thousand other publicly-traded companies, is telling you the truth about their financial condition? Nope, that's top secret (refer to section 13[b][3][A] of the Securities Exchange Act of 1934, thank you very much).

There might be one company who's exempt from telling the truth to their shareholders about their financial well being...or there might be thousands. And every one is a potential Enron waiting to happen.

In a BusinessWeek Online article yesterday, former SEC enforcement chief William McLucas, suggested that "the ability to conceal financial information in the name of national security could lead some companies 'to play fast and loose with their numbers.' McLucas, a partner at the law firm Wilmer Cutler Pickering Hale & Dorr in Washington, added: 'It could be that you have a bunch of books and records out there that no one knows about.'"

This bears repeating: for every company that the federal government has exempted from following the same laws that every other publicly-traded company has to adhere to, there is another potential Enron waiting to happen. Except this time, we might never know about it, we might never see justice served to those who are robbing their shareholders. Because this time, those companies, whoever they might be, don't have to follow the rules. Don't want another Enron to happen? Simple, just allow companies to quit following the rules altogether. Problem solved.

In other news, Bush replaced his Secretary of the Treasury, John Snow with Henry Paulsen. Some saw the appointment of the well-respected Paulsen as a sign of desperation by the Bush administration. They were so desperate to avoid financial calamity that they were forced to nominate someone competent, "scraping the top of the barrel" as Paul Krugman put it. Interestingly, the desperation was widely reported, as in this Reuters article:

Not even Paulson can save the dollar

Tue May 30, 2006
By Kevin Plumberg

NEW YORK (Reuters) - The nomination of Henry Paulson as U.S. Treasury secretary is seen as a boon for financial markets, but the Wall Street free-marketeer is unlikely to stand in the way of the falling dollar.

The depth of the U.S. current account deficit is such that financial markets increasingly believe this fundamental root of widening global imbalances will adjust only if the dollar weakens.

Having the market-savvy chief executive of Goldman Sachs at the helm of the world's largest economy instead of John Snow, often seen as more of a cheerleader for the White House's economic policies than a policy-maker himself, could lend confidence to Wall Street's perception of the Bush administration. But it won't be enough to prop up the dollar.

"Financial markets do typically like it when a Wall Streeter takes a key role in the administration," said David Mozina, head of foreign exchange strategy with Lehman Brothers in New York.

"It could be modest positive for the dollar, but still, with what has been thrown at the dollar, it's not going to be allowed to have a respite for too long," he said.

The dollar has tumbled 2.6 percent since late April after central bankers and finance ministers from the Group of Seven rich nations agreed more must be done to alleviate imbalances, including further strengthening of the Chinese yuan.

The G7 meeting, coinciding with what many observers believe to be the near end of the Federal Reserve's campaign of rising interest rates, was pivotal because it sparked the resumption of the dollar's multiyear decline after a halt in 2005.

Despite the impression that Paulson may be a steward for a stronger dollar, he is on record saying the dollar has to decline to restore balance to the U.S. current account deficit. Last year, the deficit grew to more than 6 percent of gross domestic product.

In a U.S. public television interview two years ago, Paulson said, "I'm concerned about the current account deficit, but I would say by order of magnitude, I'm more concerned about the budget deficit than the current account deficit because I really believe that the decline in the dollar -- the orderly decline in the dollar -- will lead to a natural adjustment."

Paulson, who told the Wall Street Journal in April that he has visited China 70 times since 1990, is expected to keep up pressure on the world's fastest-growing economy to allow the yuan to strengthen more, which traders equate with a weaker dollar.

"Paulson will drive home the fact that the dollar needs to be weaker against the Asian currencies specifically," said a senior dealer with an asset management firm...

Paulson's appointment comes at a touchy time, one where world markets seem to be pausing before big changes. The pause seems to have resulted from efforts to pump money into markets to postpone the downturn, including a startling, record-high 1.5 trillion yen pumped into money markets by the Bank of Japan and the sell-off (by central banks?) of gold.

Signs of a slowdown include a low U.S. job-creation number of 75,000 for May, low consumer sentiment numbers, and more indications of the end of the housing boom:

Pulte Homes Slashes 2006 Forecast as Orders Fall 29%

June 2 (Bloomberg) -- Pulte Homes Inc., the largest U.S. homebuilder, cut its 2006 earnings forecast after orders in April and May fell 29 percent from a year earlier.

The company expects to earn $4.70 to $5 a share for the year, down from its previous forecast of $6 to $6.25 a share. Earnings in the second quarter will be 85 cents to 95 cents a share, the Bloomfield Hills, Michigan-based company said today in a statement.

Demand for U.S. housing is flagging at the height of what is usually the busiest time of year for real estate sales. Home-loan applications fell last week to the lowest level in four years, the Mortgage Bankers Association said yesterday. The average rate for a 30-year fixed mortgage was 6.6 percent last week, a four-year high, according to mortgage buyer Freddie Mac.

"Current demand varies by market, but overall it continues to transition after an extended period of stronger sales," Richard J. Dugas Jr., president and chief executive officer of Pulte, said in the statement. Orders are falling because of an increase in homes on the market, more cancellations and rising interest rates, he said.

You turn into a middle-class, suburban housing project on the periphery of Charlottesville, Virginia, and at a row of attached homes, you pull up in front of the one with the yellow "for sale" sign on the tiny patch of grass. Ushered inside, you take in an interior of paint cans, a mop and pail, and cleaning liquids. On the small porch that overlooks a communal backyard, workmen are painting the weathered wood railings a nice, clean white. Later, when they're gone, we step out for a minute, on a balmy late spring afternoon, and she says, "You know what I need out here? Flowers!" And it's true, the nearest neighbor's small porch is a riot of red, orange, and purple blooms, while hanging from her railing are three plant holders with only dirt and the scraps of dead vegetation in them.

Not surprising really. Barbara Ehrenreich, our foremost journalist of, and dissector of class is regularly not here. Practically a household name since she entered the low-wage working class disguised as herself and, in her already classic account, Nickel and Dimed, reported back on just how difficult it is for so many hard-working Americans to get by. Then, a few years later, she repeated the process with the middle class, only to find herself not in the workforce but among the desperately unemployed who had fallen out of an ever meaner corporate world. Her most recent book, Bait and Switch, The (Futile) Pursuit of the American Dream, was the result. Now, she spends much time traveling the country talking to audiences about her -- and their -- experiences. She has become a blogger, is involved in launching a new group to help organize the middle-class unemployed, and in her spare time she's even finished a new book.

Now, after four years in Virginia (at least some of the time), she's about to head north. She gestures at the bookshelves. "There are a lot fewer books this week than last. I'm giving them to the Virginia Organizing Project." And it's true, the place is clearly being stripped down for sale. But you have the feeling, looking around, that it was a no-frills life to begin with, as Ehrenreich herself, in her short hair, jeans, T-shirt, and sneakers, presents a distinctly no-frills look. (Suddenly, imagining her with an image make-over advisor in Bait and Switch trying to give herself that perfect corporate look of employability seems amusing.)

Her mind is wide-ranging and daring indeed. Some years back, in a book entitled Blood Rites, she even managed to turn traditional ideas about the origins of war on their head. She is a thoroughly no-nonsense national resource.

Looking forward to a trip to the local gym followed by a visit with her two grandchildren (the daughters of her daughter Rosa Brooks, a law professor and columnist for the Los Angeles Times), we sit down at a paper-and-book cluttered dining-room table, which shows no evidence of having held a meal in some time, and -- eye on the clock, no fooling around -- begin.

Tomdispatch: You were at a graduation ceremony recently where the students were bouncing beach balls in the stands. The college president leaned over and whispered, "This is the problem with having the commencement in the afternoon. Some of these people have been partying for hours." In response, you wrote: "There are reasons, whether the graduates know them or not, to want to greet one's entrance into the work world with an excess of Bud." Could you start by explaining why an excess of Bud might be an appropriate response to leaving college today?

Barbara Ehrenreich: Well, a lot of graduates are simply not going to find jobs appropriate to their credentials. They're going to be wait staff. They're going to be call-center operators. Their twenties could be spent like that. I recently got Jared Bernstein of the Economic Policy Institute to do some research on this. It's still tentative, but he found that 17% of people in jobs that do not require college degrees have them. Those are very often people in their twenties who can't get professional-type employment, or people in their fifties who have been through one too many lay-off and are no longer employable because they're quote too old. So I was thinking of that, and then I was thinking that for a lot of those who do get jobs, you know, the fun is over. They're going to be sitting in cubicles and they won't be able to bounce balls around when they're in boring meetings with their bosses.

TD: The real earnings of college graduates fell by 5% between 2000 and 2004, so they also have that to look forward to.

Ehrenreich: There still is a real big earnings gap between college and non-college graduates, but it's begun to shrink. Jared tells me that the reason it was growing so fast in the nineties was not that college graduates were doing so well, but that low-wage people, blue-collar people, were doing so poorly. Their wages were being held down -- and that remains true.

TD: In 1989, you published a book about the middle class, or the professional-managerial class as you call them, entitled Fear of Falling. The book was way ahead of its time. If you were titling a work on the subject today you might just call it, Falling.

Ehrenreich: What I was thinking about then was the fear of intergenerational falling, the fear a lot of upper-middle class people have that their children will not get into the same class, because you can't just bequeath your class status to them. They can't inherit. They have to go through this whole education thing. Now, it could be Free Fall, though it isn't quite that bad... yet.

TD: In Bait and Switch, the book where, as an investigative reporter, you sought a corporate job and found yourself in the world of the middle-class unemployed or anxiously employed, you wrote, "On many fronts, the American middle class is under attack as never before." What happened to the middle class between then and now?

Ehrenreich: In Fear of Falling, I was concerned with the distance between the professional managerial class and the traditional working class. I thought I saw a new class developing. The strict Marxist idea is: You've got the bourgeoisie. Everybody else is a wage earner and they're not that different, whether they're accountants or laborers. And I was saying, no, there's a real difference here. The white-collar worker who sits at a desk is telling other people what to do in one way or another. Such workers are in positions of authority when compared to blue and pink-collar people.

Back then, I was emphasizing the differences. Today, in Bait and Switch, what I'm emphasizing is the lack of difference, that the security the professional-managerial class thought it had is gone. The safest part of that class, when I was writing in the eighties, seemed to be the professionals and managers with corporate positions. Then something happened in the nineties. Companies began to look at even those people as expenses to be eliminated rather than assets to be nurtured. What I was seeing in the late eighties was this pretty tight middle class where, really, the only problem was to get your kids into it, too.

TD: Your fear was for your children. Now it's for you...

Ehrenreich: ... and of course, your children, too.

TD: In Bait and Switch, you describe life in the corporate world as a "perpetual winnowing process."

Ehrenreich: One way that shows itself now is in the requirement in so many jobs for an annual -- or even an every six-month -- evaluation. You're constantly on your toes, constantly being reviewed, and potentially always up for elimination.

TD: And how do you account for the change in corporate culture?

Ehrenreich: I'm not sure. This is partly a mystery to me, but the pioneers were people like [Sunbeam's] Al ("Chainsaw") Dunlap and Jack Welsh at GE, who took pride in eliminating as many people as possible, white as well as blue collar and were richly rewarded by seeing their stock prices rise and their CEO pay go up. Leanness became the currency, what you wanted to achieve. I think part of that -- but I don't know enough yet to say this with confidence -- had to do with the fact that top executives were increasingly being rewarded with stock options, so that the distance between management and ownership was no longer there. A CEO knew that, if he could raise quarterly profits via cuts, he would get handsomely rewarded. The easiest way to raise profits is to cut expenses and the biggest expense is labor. Of course, the better way to increase profits would be to sell a better product, or more of them, or at a higher price.

TD: You're famous now for having been in two worlds as an investigative journalist, the low-wage world of the working class in Nickel and Dimed and the middle-class unemployed one in Bait and Switch. You've also, it seems to me, been one of the relatively few members of the professional managerial class to gnaw at the issue of class regularly. I suspect on this issue you really feel your politics. What was it that got you to class analysis and what kept you there when so many others were heading the other direction?

Ehrenreich: I'm sure it has something to do with my background. When I was born, my father was a copper miner in Butte, Montana. It was a hard-core, blue-collar situation. But ours was an amazing story of upward mobility. My father managed to get through college... well, the Butte School of Mines... while he was a miner. He was, by his own account, a genius. [She laughs.] Eventually, he got out of the mines and ended up as a corporate executive. He started out doing research as a metallurgist and then got turned into an executive. So my childhood was sort of an unguided tour of American classes.

TD: For people I've known, leaping classes tended to be a complicated, painful experience.

Ehrenreich: Well, my dad was always a heavy drinker, but he was a falling-down drunk by the time he finished his career -- or it was finished for him. He wanted all that. He wanted success. He wanted to make more money -- not that we were ever wealthy, but we certainly got toward the upper end of the middle class. But he also had this social nostalgia for the mines and would often talk about men he had worked with, things that had happened. It was clear to me that that was a real world of much stronger ties among people.

TD: And that he had lost something?

Ehrenreich: Oh yes! One thing that stuck with me and helped me when I was doing Nickel and Dimed: I had told him in the seventies about young leftists going to work in factories to organize the working class. He thought that was hilarious, but then he said something very interesting: "Do you know what they probably don't understand? If you want to do something like that, the first thing is you have to do your job right. The first thing is -- do the work." As a miner he had known communists organizing in the mines, but wasn't always impressed with them because some of them weren't good miners.

TD: Is there less mobility, and less study of it, than there was in your father's day?

Ehrenreich: There is less. We don't compare well to Europe any more on that score.

TD: You now have a blog. You travel the country extensively and, because of your books, you hear from blue-collar and white-collar people in various kinds of trouble. What sorts of stories do you hear these days? What don't we know?

Ehrenreich: Both chronic, long-term poverty and downward mobility from the middle class are in the same category of things that America likes not to think about. Periodically, we'll have some little focus on poverty, like post-Katrina, but then it goes away again. After the dot.com crash, there was a brief moment of thinking about downwardly mobile software people; then we forgot about them. But it's there all the time, these crises in people's lives.

When it comes to the media, anything about economic pain is what gets left out. People sometimes say to me, why do you always focus on the downside? Because morally that seems to be my obligation -- to look at pain. Not to celebrate every instance of successful entrepreneurship, but always to think of who's hurting. That just seems like a basic moral requirement for everybody. But that's what's missing too often in the media, the pain.

Stories of pain, the forum on my website is full of them. People will just post them:

I have a master's degree in mechanical engineering. I give up. I've been searching for three years.

I'm living with my parents now. I had to give up my apartment, my home.

I'm working in a call center now.

That's the kind of thing I hear, over and over. And then people are losing pensions, losing health insurance. That's happening across the board -- to people in middle-class occupations too.

TD: You recently commented, "Thanks to Reagan, Clinton, and Bush, we now have a government with vastly expanded military and surveillance functions and sadly atrophied helping functions. Imagine, for an awkward zoological analogy, a lioness with grossly enlarged claws and teeth but no mammary glands."

Ehrenreich: This was something I first wrote about in 1997 in an essay in the Nation which they entitled, "Confessions of a Recovering Statist." I talked about the shift of government, at the end of the Clinton years, away from the helping functions and toward the military, penitentiaries, law enforcement. At what point, I asked, do progressives have to say: I don't want to expand the helping functions of this government because look what it's doing? A nice example is public housing -- okay, public housing's a good thing, but when you start doing drug tests on people to get in or stay in such housing, then it's become an extension of the law enforcement function of government.

I still raise that question. Today, we have this even larger federal government, more and more of it being war-related, surveillance-related. I mean it's gone beyond our wildest Clinton administration dreams. I think progressives can't just be seen as pro-big-government when big government has gotten so nasty.

TD: And also when civil society has been stripped of so many of its "civil" capacities, including, as with Katrina, the capacity to rebuild.

Ehrenreich: Katrina's a perfect example of how militarized the government has gotten even when it's supposedly trying to help people. The initial response of the government was a military one. When they finally got people down there, it was armed guards to protect the fancy stores and keep people in that convention center -- at gunpoint! I mean, this is unbelievable.

TD: And what about the fobbing off of the civil parts of government onto religious and charitable groups, often politicized?

Ehrenreich: It's partly that the evangelical churches have reached for these things, and then there's the faith-based approach coming from the Bush administration where the dream was: Let's turn all social welfare functions over to churches. A lot of the megachurches now function as giant social welfare bureaucracies. I wouldn't have found this out if I hadn't been researching Bait and Switch and gone into some of them, because that's where you go when you want to connect with people to find a job. That's also where you find after-school care, child care, support groups for battered women, support groups for people with different illnesses. As government helping functions dwindle, the role of the churches grows. What's sinister is that so many of these churches also support political candidates who are anti-choice, anti-gay, and -- not coincidentally -- opposed to any kind of expansion of secular social services.

TD: Let's turn to the hot-button issue of immigration. For Nickel and Dimed, you went to places where there was still a low-wage, white working class -- Minnesota, Maine...

Ehrenreich: Not Key West which was packed with immigrant workers. But I did choose my places carefully, because real ethnic sorting does go on. For example, my son Ben Ehrenreich, who is also a freelance journalist, decided to get a job in a meat-packing plant in LA. When he showed up, sixty guys were there and he was the only Anglo. Though he speaks perfect Spanish, he was rejected because they just think: What's he doing here? Employers get it in their minds that a certain kind of work is done by a certain kind of person and we're not going to hire someone different. When I realized that was going on in Key West, I said: Next stop, Maine, where almost everyone is white and I wouldn't run into racial sorting. I couldn't have done Nickel and Dimed so easily in LA or New York because they would have thought: Blue-eyed, white, middle-aged woman; if she wants this job, she must have a serious drug problem. [She laughs.]

TD: The issue of class and immigration threatens to split what's left of the Bush administration constituency, but not just them. How do you read the class politics of immigration?

Ehrenreich: My son went to a Minutemen gathering in the southwest and the fascinating thing was that a lot of the leaders talked a very big anti-corporate line: The corporations are crushing us, we're the real Americans, and so forth. In their minds, the immigrants are part of the thing that's crushing them and it's so much easier to pick up a gun and go to the border than to confront your employer.

Then, commentators keep saying that Americans won't take the jobs immigrants take. It's not that native-born Americans won't do heavy work and hard work and sweaty work. The problem is that these jobs pay so little. What makes it possible for immigrant workers to live on such low wages is their willingness -- at least temporarily -- to put up with just impossible situations, with many people packed into a room. After all, what does immigration do, in corporate terms? It provides a group of people you can really, really exploit. As long as they're illegal, you can do anything you want to them. Like not pay them. Not at all. If you were going to take on the immigration issue seriously, you'd have to look at what NAFTA did to the economy and agriculture for working-class Mexicans. Much of the immigration stuff is standard scapegoating. I mean, we're not going to begin to get at the problem until we take a serious look at the economies of the countries that are exporting people. Illegal immigrants are not coming here for the climate. We need to ask: How would we help Mexico, for example, become a place with stable employment and agriculture. Not with NAFTA for sure.

TD: Isn't the other side of the immigration issue, the outsourcing of jobs?

Ehrenreich: It's very hard to have a serious discussion of outsourcing when we have no safety net for people whose jobs are outsourced. It's calamitous to lose your job and that experience does pit you against the software writer in Bangalore. The longer term issue is: How do we get together across those national boundaries, so that the software writer in Atlanta is talking to the one in Bangalore and saying, we're in this together?

TD: What about the lack of protest in our world, especially the middle-class world you visited in Bait and Switch? You've started a new organization to begin to deal with this, right?

Ehrenreich: You know, after I wrote Nickel and Dimed, so many middle-class people would say to me: Oh, what's wrong with these people? Why do they take it? Well, they didn't just take it! Even if they expressed defiance in ways that were not too productive like laughing at the boss behind his back or regularly breaking little rules. With the white-collar people, though, it just seemed so internalized. I couldn't get over it, how beaten down people were, how they had internalized obedience. The fear of standing out in any way that might be noticed seemed to grip them.

Our new organization, United Professionals, had its launch meeting in Atlanta at the end of April. Its constituency is unemployed, underemployed, and anxiously employed white-collar people. Now, it's not a union. Obviously, you can't have a union for people with such vastly different employers and professions. But it will provide advocacy for universal health insurance, extended unemployment benefits, and the like. And some services. We're looking at ways of offering cheap health insurance and mostly what I call networking, not in the instrumental corporate fashion, but a coming together, people sharing their stories, trying to figure out for themselves what's going on, what they need to do.

TD: A little à la early feminism then.

Ehrenreich: I see so many parallels because there's a huge stigma attached to unemployment. People who have been laid off are very ashamed and depressed. There's a need to come together and overcome that shame. In those early meetings in the feminist movement of the seventies, people were ashamed to talk about having been raped. They were ashamed to talk about having been molested as a child. To be able to say that has happened to other people proved transforming. So let's bring it out, let's see what the problem is here.

TD: Isn't this the problem without a name again?

Ehrenreich: Exactly. So I see the need for something at the same level of emotional involvement as in the early women's movement.

TD: What other solutions to white-collar distress do you imagine?

Ehrenreich: Obviously you want some employment rights like the French just fought to preserve -- saying you can't be fired at will, that a procedure must be gone through. When I was in England recently talking about Bait and Switch, my publisher told me: "You know, people aren't quite understanding what you're saying, how you could be laid off or fired without any procedure." They didn't understand the concept of employment at will. So I had to explain that, in America, you have no rights: no right to your job, no right to a hearing. You could be fired for a funny expression on your face.

Some of the people involved with United Professionals are looking into the concept of fighting collectively for what are called transition rights. Let's say everybody gets laid off. This happened at a mortgage company in Fort Wayne, Indiana. Layoffs of hundreds of white and pink-collar people. They're all told individually, here's your little severance package; now, never say another word or we might take it away. They're trying to take this on as a group and respond: No, you can't deal with us like that; we all want a severance package we can live with or at least that will get us through a few months.

TD: In that half-century-plus from the 1950s to the present, do you feel there's been a transformation of middle-class culture?

Ehrenreich: It's more sealed off for sure. If you're in the upper middle class you never have to interact with other classes, except with your servants or a cab driver or a manicurist...

TD: ...until you get fired by your corporation, of course.

Ehrenreich: Yes, that's the surprise, but until then, your children won't go to the public schools; you won't be using the public parks on weekends. You don't ride public transportation if you're in that class. They're really walled off.

TD: Back in 1989, you wrote of a "culture in which the middle class both stars and writes the script." What did you mean and is it still true?

Ehrenreich: There's been a lot of polarization within the professional-managerial class since the 1980s. There is now a huge gap, for example, between a journalist and the managing editor of the paper. The difference between the university provost and the associate professor of sociology could be a hundred thousand dollars a year. They're less and less in the same world. So I would modify that statement. The scriptwriters have gotten higher up.

TD: What would an anatomy of your professional-managerial class of 1989 look like now?

Ehrenreich: The main thing is there's just more leakage at the bottom, people falling out of it. In 1989, college education had expanded a lot, but not as much as today. Now, so many jobs insist on a college education. I have no idea why. I think they're just training people to sit quietly for long periods of time. Obedience training I guess is the phrase...

TD: ...for dogs.

Ehrenreich: Yeh! I don't see where a typical BA even represents any serious skills. Obviously I'm for education, but there's a major element of rip-off here.

TD: What happened, by the way, to the famed 1950s man in the grey flannel suit? I was amused that, for your working class book, you could go to work more or less dressed as you are now, wearing a T-shirt and jeans.

Ehrenreich: I think you would need khaki pants.

TD: Right. But when you tried to make your way into the corporate world, there was this constant stylistic retooling. No more single uniform.

Ehrenreich: The explanation for that -- which sociologist Robert Jackall offered and my image make-over guy confirmed -- is that, by being precisely right in your appearance, you signal that you'll conform in any other way they might want. You're sending a signal about your degree of compliance.

TD: Certainly the man in the grey flannel suit didn't expect to get a $300 million thank-you note when he retired. Here's a figure you had in one of your blog entries: "The top 10 percent of households saw their net worth rise [between 2001 and 2004] by 6.1 percent to an average of $3.11 million." I was wondering how you looked at the vast payoffs to CEOs, a tiny endowed elite, who will, in fact, be able to endow their children.

Ehrenreich: It's just plunder. You have your pay determined by a board of your buddies, often just other CEOs. They can take what they want. What was it in the paper today? Home Depot. [She grabs a newspaper off the table and begins rifling through it.] "The stock fell but the chief's pay kept rising." That's news? [She laughs.] Or it was Verizon? Stock tumbled and the CEO got a raise. They'll push down wages as far as they can, and if there's no union to stop them, they'll just keep going, and they'll push up their own pay. There's no limit to what they'll take!

TD: You've talked about the invisibility of the poor, the low-wage working class, and these middle-class people falling out of the corporate world, but in a weird way aren't the rich invisible, too?

Ehrenreich: Well, not that invisible, because they're always in the media spectacle, though they aren't studied enough. I think that the poor know much more about the rich than vice versa. You can get some sense of their lives from the entertainment media and, if you clean their houses or you wait on them in stores, you sort of see them. Whereas the other way around doesn't seem to function.

TD: What I was thinking, though, was: Who writes books today with titles like: Who Rules America?

Ehrenreich: My fantasy after Bait and Switch was to go undercover among the rich. I spent a long time talking to [Harper's Magazine editor] Lewis Lapham about it, but we came to the dismal conclusion that I wouldn't pass. It's not only things like fingernails, but that a woman of my age should have had a lot of surgery. I would be a dead give-away. Not to mention: How do you get access? Too bad -- I thought that would be so much fun to do.

TD: Looking toward the midterm and presidential elections, what are your thoughts?

Ehrenreich: I don't spend a lot of time thinking about electoral politics, though I'm kind of interested in John Edwards, because since '04 he's devoted himself to talking about poverty and he's showed up at picket lines and the like.

TD: In terms of the issues that matter to you, can you explain the difference between Democrats and Republicans to me?

Ehrenreich: [Laughs.] What kind of question is that, Tom!

TD: I've been writing a lot, based on that infamous presidential Mission Accomplished banner of 2003, about what the Bush administration hasn't accomplished abroad. There, I believe, they're already standing in the rubble of their own project. But have they accomplished more of their mission more successfully at home?

Ehrenreich: No, because they haven't completely dismantled the welfare state, I mean, welfare itself is pretty much just a pathetic wage-supplementation program now, but they couldn't get rid of social security and they actually expanded Medicare. There's a trip-wire people have not let them go over yet. I remember hearing Stuart Butler, a Thatcher guy who arrived from England at the end of the Reagan years, say that he felt this was a country where he could really see his goal, the destruction of the welfare state in all forms, being achieved. Well, they haven't done it.

However, one of the places where they've been most successful, as Peter Gosselin, an economics writer for the LA Times, has pointed out incisively, is in shifting risk to individuals. It's happening with the disintegration of the whole concept of insurance. Insurers don't want to insure the coasts any more; they certainly don't want to give anybody health insurance who might ever get sick. That's one of the things they've done pretty well at. In the ownership society, you take care of yourself; don't bother us, it's your problem.

TD: When you look to the future, do you see some path other than this incredible one we're on that seems possible?

Ehrenreich: Oh, yes! I'm sort of a libertarian socialist type. There are a lot of things that just should not be in the market. Health care, that should be taken care of. I think there's a place for markets, but there's always going to be tension between markets and our mutual responsibility.

TD: If the polarization in the middle class you describe continues apace, do you imagine a moment when those dropping out of the old middle class and the corporate world may make common with...

Ehrenreich: That's my whole theme as I've trooped around the country talking about Bait and Switch to somewhat more middle-class audiences than I normally get with Nickel and Dimed: There's a lot in our society that makes people with college degrees and white-collar jobs think they're special and superior. But next time you're seeing that person pushing the broom, remember, you may be one year, maybe even six months away from that yourself. You're not special, not in the eyes of the owners and the CEOs. So we've got to get together; we've got to bridge that divide, get over that snobbishness.

TD: Let's turn briefly to war. We're in a war period and you've offered a thoroughly ingenious explanation for the origins of... well, you call them humanity's blood rites in a book of the same name. You've suggested that they came not from our prehistory as aggressive hunters of prey, not even out of aggression, but out of fear and from an even earlier period when we were the prey of other creatures. Of course, in a non-war situation in your two recent books you've been dealing with the prey. But I was wondering if you have any comments on our modern blood rites?

Ehrenreich: First, you said something interesting about looking at the prey in my books on economic themes. Well, yeh! And the way in prehistory that humans or hominids rose from prey to predators was through collective action. I mean that is the great human trick. Weapon-making, too. We're smart at that. But there's a human ability that doesn't get enough attention -- that ability to mobilize concertedly as a group. I think that's ultimately what tipped the balance in our favor. Other primates can jump around together to ward off a predator, but humans can do it so much more effectively. We're good at collective action. Similarly, to get out of these internal prey situations in our own economy, you've got to band together. That's not just a lesson from the last 200 years of labor history, but one of the deepest lessons from thousands of years of human experience.

Now, what do I think of wars at present? Well, the current war and the first Gulf War were, to a certain extent, rally events. That's a term sociologists started using fairly recently to describe something that leaders initiate for the purpose of manipulating mass emotions. In their favor of course. [British Prime Minister] Margaret Thatcher was sinking in the polls when she did the Falklands War, just as the first George Bush was before Gulf War I when he soared to something like 90% approval.

TD: And, by the way, the younger Bush before 9/11.

Ehrenreich: That's right. It was just sort of handed to him on 9/11. Of course, it was his choice to invade a random country in response. But that rally effect has not lasted and I don't think they can pull it off again. I don't think people are going to start waving American flags for the bombing of Tehran. The scarier thing would be another terrorist attack which might mobilize some crazed, non-rational response. What do we hit next? Norway? Because these people are not understanding that terrorism doesn't pose a normal military challenge. What the U.S. is doing in Iraq is as silly as the British marching around in little files in the forests of North America in red uniforms and getting picked off by Americans hiding behind trees. There's just no clue as to what to do. Historically, if you don't make the transition to the next threat, if you're still fighting, basically, the Second World War, which is as far as they've advanced, you're not going to make it.

TD: Last thing -- maybe a term that's disappeared might be worth reconsidering: class war.

Ehrenreich: I already use it when I'm talking to groups. I say, yes, there's a class war. It's totally one-sided and it's time for the rest of us to mobilize against the aggressors.

Original Copyright 2006 Tomdispatch

Zionist control was discreet but tight. The Committee's correspondence was drafted in the AZEC headquarters and sent to [chairman New York Senator Robert] Wagner for his signature. Mail addressed to Wagner as head of the American Palestine Committee, even if it came from the White House or the State Department, was opened and kept in Zionist headquarters; Wagner received a copy. The AZEC placed ads in the press under the committee's name without bothering to consult or advise it in advance, until one of its members meekly requested advance notice.

The Yom Kippur statement marked a watershed in the political and diplomatic struggle for the Jewish state. The British saw in the statement a demonstration of Jewish political power and gave up their quest for an Anglo-American consensus on Palestine. [British Foreign Secretary] Bevin began issuing threats that the British would evacuate Palestine, and in February 1947 they did indeed refer the question with no recommendation to the United Nations.

"Re kids-never say never" (emphasis in original);

"Pesticides have benefits. Rule should say so. Testing, too, has benefits"; and

"We want a rule quickly-[therefore] narrow [is] better. Don't like being singled out but, speed is most imp."

"Distinguish testing kids from using data on kids who were tested"; and

"Some workers may legally be children, albeit old enough for DOL" [Department of Labor coverage].

Comet is coming