Resource Wars: The New Landscape of Global Conflict

Author: Michael T Klare

From the oilfields of Saudi Arabia to the Nile delta, from the shipping lanes of the South China Sea to the pipelines of Central Asia,Resource Wars looks at the growing impact of resource scarcity on the military policies of nations.

International security expert Michael T. Klare argues that in the early decades of the new millennium, wars will be fought not over ideology but over access to dwindling supplies of precious natural commodities. The political divisions of the Cold War, Klare asserts, have given way to a global scramble for oil, natural gas, minerals, and water. And as armies throughout the world define resource security as a primary objective, widespread instability is bound to follow, especially in those areas where competition for essential materials overlaps with long-standing territorial and religious disputes. In this clarifying view, the recent explosive conflict between the United States and Islamic extremism stands revealed as the predictable consequence of consumer nations seeking to protect the vital resources they depend on.

A much-needed assessment of a changed world, Resource Wars is a compelling look at warfare in an era of rampant globalization and intense economic competition.

Review:

Having written and taught on the issue of resources and national security for many years, I approached the task of reviewing Resource Wars. The New Landscape of Global Conflict with substantial interest. I found that Michael Klare has written an uneven but topical text on strategic resources. It is valuable because it draws the attention of the national security community to the strategic importance of resource access in developing foreign policy, both as a requirement for economic growth and a potential source of conflict. It is seriously flawed because of the largely unsubstantiated assertions with which Professor Klare promotes the thesis that resources will be the dominant source of conflict in the 21st century.

Klare uses current resource conflicts to overstate the causal and predictive role of resources to future conflict. Readers familiar with the rigorous manner in which theories predicting state behavior are substantiated by security scholars will find his logic and conclusions debatable and may, as a result, fail to reconsider the role of resources in future conflict. Resources are important to security and have been so since events were first recorded. Nations migrated in search of water, arable land, food, and the resources necessary to sustain national vitality, often displacing or fighting with other peoples. As civilization evolved, resources figured prominently in political-military strategy: Cornwall, for example, was important to Rome as a source of tin; technological evolution created new resources, such as the components of gunpowder and the metal alloys necessary to produce superior weapons. The industrial revolution led to the mechanization of warfare, which substantially increased strategic resourc es. As Hans Morgenthau articulated in his influential work Politics Among Nations, "National power has become more and more dependent upon the control of raw materials in peace and war."

Although not discussed in detail in the book, World War II served as a case study in the importance of resources to national security. Karl Haushofer's concepts of lebensraum and autarky stressed the salience of resource access and self sufficiency to state power. Access to petroleum was a primary interest of Japanese and German strategy. And, of course, the Belgian Congo became essential to the US war strategy when its uranium deposits provided the fuel for the US nuclear program.

The study of resource-related issues during World War II and the Cold War--and the academic debate over their relevance--has been a dominant theme of national security literature for decades and would seem to be important to any book titled Resource Wars: The New Landscape of Conflict. However, very little of the rich history of resource wars surfaces in Dr. Klare's text. In fact, the author ignores the Cold War role that resources played in the competition for economic growth and power when he writes, "With the end of the Cold War, resource issues reassumed their central role in US military planning."

Interestingly, these assertions are not necessary to make the point that resources underpin the vitality of the United States and are essential to meet the demands placed on the political systems of most states. One need not assert that armies around the world are "redefining resource scarcity as their primary mission" to suggest that access to resources may well trigger conflict in regions where existing tensions, intra-state or international, already exist. Similarly, the author omits discussions of the powerful role resources played in influencing the African policies of the superpowers during the Cold War, while quoting the isolated Africa policy statements of the Clinton Administration to suggest that Africa is assuming a new, central position of strategic importance because of resource deposits. Further, ignoring the Breton Woods agreements, the critical role of economics to free world viability, the focus on industrial output as a measure of power in East-West competition, the rise of economics as a do minant variable in security studies in the 1 980s and agreements such as NAFTA, the author writes that economics became central to US national security only with the Clinton Administration. Such astounding assertions raise red flags for readers of security studies who are used to carefully worded, well-substantiated arguments. These assertions detract markedly from an otherwise interesting book.

The first and last chapters of Resource Wars are designed to promote Dr. Klare's central thesis: "Resource wars will become... the most distinctive feature of the global security environment." The last chapter, surprisingly, was excerpted in Foreign Affairs. Of the remaining seven chapters, four discuss oil, two discuss water, and one chapter briefly addresses minerals and timber. There are good summaries of many of the well-known resource issues and hot spots, such as the Persian Gulf and the Nile and Tigris-Euphrates rivers. However, Professor Klare does not convince the reader that resources can predict conflict. The book would have been much more valuable if it included chapters on food and arable land, strategic industrial resources, population, and resource wars literature, and if it discussed at length the roles of technology, economics, and the environment in affecting the quantity of resources. The book is worthy of inclusion in college library collections because of the current dearth of books on re sources and conflict. Unfortunately, it lacks the breadth of subject matter, rigor, and scholarly review of resource and security literature to recommend including it in the collection of a national security scholar or selection as a course text.

Western Diseases

New from Cambridge University Press: Western Diseases: An Evolutionary Perspective by Tessa M. Pollard.

About the book, from the publisher:

As a group, western diseases such as type 2 diabetes, cardiovascular disease, breast cancer, allergies and mental health problems constitute one of the major problems facing humans at the beginning of the 21st century, particularly as they extend into poorer countries. An evolutionary perspective has much to offer standard biomedical understandings of western diseases. At the heart of this approach is the notion that human evolution occurred in circumstances very different from the modern affluent western environment and that, as a consequence, human biology is not adapted to the contemporary western environment. Written with an anthropological perspective and aimed at advanced undergraduates and graduates taking courses in the ecology and evolution of disease, Tessa Pollard applies and extends this evolutionary perspective by analysing trends in rates of western diseases and providing a new synthesis of current understandings of evolutionary processes, and of the biology and epidemiology of disease.

Just How Stupid Are We?

New from Basic Books: Just How Stupid Are We?: Facing the Truth about the American Voter by Rick Shenkman.

About the book, from the publisher:

Levees break in New Orleans. Iraq descends into chaos. The housing market teeters on the brink of collapse. Americans of all political stripes are heading into the 2008 election with the sense that something has gone terribly wrong with American politics. But what exactly? Democrats blame Republicans and Republicans blame Democrats. Greedy corporate executives, rogue journalists, faulty voting machines, irresponsible defense contractors-we blame them, too. The only thing everyone seems to agree on, in fact, is that the American people are entirely blameless. In Just How Stupid Are We?, best-selling historian and renowned myth-buster Rick Shenkman takes aim at our great national piety: the wisdom of the American people. The hard truth is that American democracy is more direct than ever-but voters are misusing, abusing, and abdicating their political power. Americans are paying less and less attention to politics at a time when they need to pay much more: Television has dumbed politics down to the basest possible level, while the real workings of politics have become vastly more complicated. Shenkman offers concrete proposals for reforming our institutions-the government, the media, civic organizations, political parties-to make them work better for the American people. But first, Shenkman argues, we must reform ourselves.

Innovation and Inequality

Author: Gilles Saint-Paul.

About the book, from the publisher:

Karl Marx predicted a world in which technical innovation would increasingly devalue and impoverish workers, but other economists thought the opposite, that it would lead to increased wages and living standards--and the economists were right. Yet in the last three decades, the market economy has been jeopardized by a worrying phenomenon: a rise in wage inequality that has left a substantial portion of the workforce worse off despite the continuing productivity growth enjoyed by the economy. Innovation and Inequality examines why.

Studies have firmly established a link between this worrying trend and technical change, in particular the rise of new information technologies. In Innovation and Inequality, Gilles Saint-Paul provides a synthetic theoretical analysis of the most important mechanisms by which technical progress and innovation affect the distribution of income. He discusses the conditions under which skill-biased technical change may reduce the wages of the least skilled, and how improvements in information technology allow "superstars" to increase the scale of their activity at the expense of less talented workers. He shows how the structure of demand changes as the economy becomes wealthier, in ways that may potentially harm the poorest segments of the workforce and economy. An essential text for graduate students and an indispensable resource for researchers, Innovation and Inequality reveals how different categories of workers gain or lose from innovation, and how that gain or loss crucially depends on the nature of the innovation.

Loneliness as a Way of Life

Author: Thomas Dumm

About the book, from the publisher:

“What does it mean to be lonely?” Thomas Dumm asks. His inquiry, documented in this book, takes us beyond social circumstances and into the deeper forces that shape our very existence as modern individuals. The modern individual, Dumm suggests, is fundamentally a lonely self. Through reflections on philosophy, political theory, literature, and tragic drama, he proceeds to illuminate a hidden dimension of the human condition. His book shows how loneliness shapes the contemporary division between public and private, our inability to live with each other honestly and in comity, the estranged forms that our intimate relationships assume, and the weakness of our common bonds.

A reading of the relationship between Cordelia and her father in Shakespeare’s King Lear points to the most basic dynamic of modern loneliness—how it is a response to the problem of the “missing mother.” Dumm goes on to explore the most important dimensions of lonely experience—Being, Having, Loving, and Grieving. As the book unfolds, he juxtaposes new interpretations of iconic cultural texts—Moby-Dick, Death of a Salesman, the film Paris, Texas, Emerson’s “Experience,” to name a few—with his own experiences of loneliness, as a son, as a father, and as a grieving husband and widower.

Written with deceptive simplicity, Loneliness as a Way of Life is something rare—an intellectual study that is passionately personal. It challenges us, not to overcome our loneliness, but to learn how to re-inhabit it in a better way. To fail to do so, this book reveals, will only intensify the power that it holds over us.

The Limits of Power: The End of American Exceptionalism

Author: Andrew J. Bacevich

The Limits of Power identifies a profound triple crisis facing America: the economy, in remarkable disarray, can no longer be fixed by relying on expansion abroad; the government, transformed by an imperial presidency, is a democracy in form only; U.S. involvement in endless wars, driven by a deep infatuation with military power, has been a catastrophe for the body politic. These pressing problems threaten all of us, Republicans and Democrats. If the nation is to solve its predicament, it will need the revival of a distinctly American approach: the neglected tradition of realism.

Andrew J. Bacevich, uniquely respected across the political spectrum, offers a historical perspective on the illusions that have governed American policy since 1945. The realism he proposes includes respect for power and its limits; sensitivity to unintended consequences; aversion to claims of exceptionalism; skepticism of easy solutions, especially those involving force; and a conviction that the books will have to balance. Only a return to such principles, Bacevich argues, can provide common ground for fixing America’s urgent problems before the damage becomes irreparable.

Making Government Work

Author: Ernest F. "Fritz" Hollings

"Performance is better than promise" has long been the motto of Ernest F. "Fritz" Hollings, a former Governor of South Carolina and six-term U.S. Senator who has distinguished himself as a stalwart advocate of fiscally responsible progressive programs. In this political memoir, Hollings takes aim at our increasingly flawed political system and a government that has gone "into the ditch." As remedy he pulls antidotes from anecdotes about his personal experiences in making government work in spite of itself for the past half century.
Hollings's long political career speaks volumes about the potential of the elected and the electorate to use government for the good of all. As South Carolina's Governor in the early 1960s, Hollings oversaw the social transition of the state into the civil rights era and from an agriculture-based economy to an industry-based system with international partnerships. In the U.S. Senate from 1966 to 2005, he took point on shepherding new policies to address hunger, environmental conservation, energy consumption, communications, international trade, campaign finance, the federal budget, space exploration, and national defense. Hollings's instructive recollections of these efforts form a user's manual for our representative democracy as he shares compelling—and often candidly colorful—accounts of the smart stewardship of resources and authority needed to enact policies that make positive differences in the lives of Americans.
Confrontational at times toward those issues and institutions he cites as responsible for knocking government off course, Hollings lays out clearly his deep commitment to improving our system of government, strengthening regulations on free trade, countering dependence on campaign contributions, and enhancing our communications and education programs to compete better in an information-driven global marketplace. This prescriptive compendium of sound thinking from an experienced agent of change seeks to reinvigorate a floundering system and actively calls good people and good ideas back into the service of America's bright future.
ABOUT THE AUTHOR
Ernest F. "Fritz" Hollings has enjoyed a remarkable career in public service as a South Carolina legislator (1949–1954), Lieutenant Governor (1955–1959), Governor (1959–1963), U.S. Senator (1966–2005), and U.S. presidential candidate (1983–1984). A visionary workhorse, Hollings has focused throughout his career on putting government on a sound financial basis and promoting economic development to create opportunities. Recognized as a policy expert on the budget, telecommunications, the environment, defense, trade, and space, he is the author of the Coastal Zone Management Act (1972), the Ocean Dumping Act (1972), and the Automobile Fuel Economy Act (1975) and coauthor of the Gramm-Rudman-Hollings Deficit Reduction Act (1985). Hollings led in the creation of the Special Supplemental Nutrition Program for Women, Infants, and Children in 1972 and passage of the Telecommunications Act of 1996.
Kirk Victor covers the U.S. Senate for the National Journal and was part of a reporting team that won a National Headliner Award in 2005 for coverage of Congress. A native of Savannah, Georgia, Victor has a law degree from the Antioch School of Law and a M.S. degree in journalism from Columbia University.
REVIEWS
"Making Government Work is an accurate accounting of the key role Fritz Hollings played in dealing with the major legislative and political challenges of the day as a South Carolina Governor and U.S. Senator. While elements of the book reflect Senator Hollings's partisan views, it more importantly recounts his bipartisan efforts on vital issues such as hunger, budget, and defense. Only Hollings could make such a compelling case on how to make government work. His straightforward style will appeal to anyone interested in the inner workings of government."—Bob Dole
"In the U.S. Senate, Fritz Hollings was known for his candor. In this engaging memoir he demonstrates that he's still telling it like it is! In direct no-nonsense language, Hollings describes his remarkable political career of nearly a half century of service to the people of South Carolina and the nation. Whether you agree or disagree with him on the issues, when you finish this lively book, you'll agree that Fritz Hollings was an extraordinary Senator and public servant."—George J. Mitchell
"Fritz Hollings, the keenest wit in the Senate and a grand storyteller, reveals how the people's business gets done; why big money, nonstop news cycles, polling, and armies of costly consultants produce only deadlock; and what we can do to make our government work again. Every voter should read this book."—Richard J. Whalen
"Throughout his remarkable career, Fritz Hollings distinguished himself as a commonsense statesman and a responsible, effective servant to our state and country. Still showing his trademark wit and wisdom, Hollings treats us to an insider's candid retrospective on how government forged successes in the past, as well as a compelling vision of how it can be made to serve the people's interests better in the future. Hollings has given us an owner's manual for operating our democracy in the twenty-first century, and every American can benefit from his insightful message."

Banana: The Fate of the Fruit That Changed the World

Author: Dan Koeppel

Review: Boston Globe

Thanks to Dan Koeppel, I'll never walk through the produce aisle the same way again.

Until I read his new book, "Banana: The Fate of the Fruit That Changed the World," I had never really wondered why there were myriad varieties of apple - Royal Gala, Granny Smith, Red Delicious, Macoun, McIntosh, etc. - yet just one monolithic, curved sweet yellow fruit labeled simply "bananas." (Plantains don't count; they're green and you have to cook them before you eat them.)

The reason, it turns out, is that the banana as we know it is a worldwide poster child for bio-nondiversity. Known as the Cavendish, the bananas sold in my local supermarket in Watertown are virtual genetic duplicates of the ones sold at my sister's greengrocer in Los Angeles and at food markets in Tokyo, Paris, and Rio de Janeiro. The Cavendish is grown everywhere from Central America to New Guinea to India to the Caribbean to Southeast Asia.

In "Banana," Koeppel, a longtime outdoors and adventure writer, weaves a multifaceted story about how the fruit's unique nature has allowed it to become a worldwide food staple and a geopolitical force that has both shaped and toppled nations.

In the hands of a lesser writer, the book's multiple personalities - it is at once a political and economic treatise, a scientific explication, and a cultural history - might have proved unwieldy. Koeppel, though, weaves all of these elements together seamlessly enough that the reader really doesn't notice. While ambitious in scope (the author takes us all the way back to the Garden of Eden to argue that the forbidden fruit of Genesis was most likely a banana, not an apple), "Banana" also comes in at a manageable 304 pages.

I found much of what was within both fascinating and disturbing, particularly the sections on the practices of large US banana-importing companies during the 20th century and on how the banana's genetic uniformity makes it susceptible to plant epidemics on a worldwide scale.

Koeppel describes how, in their day, banana companies like United Fruit and Standard Fruit were as innovative, ruthless, and pervasive as any of today's big multinationals. While the banana's enduring place in American culture has much to do with the fruit's taste and nutritional qualities, it is also a testament to the banana companies' marketing genius.

The quintessential "American" breakfast of corn flakes and bananas? Invented in a United Fruit test kitchen. Bananas as the perfect baby starter food? When the banana marketers noticed that mothers were feeding mashed-up bananas to their infants, they quickly lined up scores of medical experts to validate the practice.

Less benign, though, was big fruit's behavior in Central and South America, where it employed private armies, toppled governments with CIA help, and poisoned thousands of workers with toxic pesticides. The amount of "Yanqui, go home" sentiment in that part of the world used to puzzle me. Now I wonder why there isn't more.

Also disturbing to me was Koeppel's explanation of how the Cavendish is now threatened by disease to the point of possible extinction. Sound unlikely? Well, he explains, it has happened before.

As it turns out, the Cavendish is not our grandfather's banana. That variety, called the Gros Michel ("Big Mike"), was wiped out by the same malady, Panama disease, that threatens the bananas on our own kitchen tables. Only this time there is no substitute variety, no Cavendish, waiting in the wings. It is at this point in the book that Koeppel dons an advocate's hat, pronouncing himself in favor of genetic engineering as a way to save the banana as a modern household staple.

Personally, I could have done without the cheerleading. But even for an organic-food enthusiast like me, his arguments - like the rest of the book - were compelling enough that they made me think. And that alone is worth the cover price.

Scientific American Article:

Where would we be without bananas? The silent-movie industry, founded on images of men in bowler hats being launched into the air by banana skins, might never have gotten off the ground, so to speak. Kids would have to pack drippy citrus into their lunch boxes. The band Bananarama could have been the more fetid Apricotarota. When Shakespeare “let slip the dogs of war,” what do you think they slipped on?

I am banana-powered. When I was growing up, my daily breakfast carried the official name of “Rice Krispies, banana and milk.” Nowadays I often tuck a banana into a pocket on my cycling shirt, for a midride potassium pick-me-up. In fact, I’m taking a short break to eat a banana right now.

Okay, I’m back. (I smeared a little peanut butter on the banana, something that doesn’t work that well while biking.) What’s my lifetime banana record? According to Dan Koeppel, author of Banana: The Fate of the Fruit That Changed the World, “If you are an average American, about forty years old, you’re probably approaching banana ten thousand.” So I’m probably up to about 15,000 bananas. (Because of my age? Because I’m not average? I’m not telling.)

While researching his book, Koeppel spent a week on a banana plantation in Honduras. This winter I found myself in a similar environment. On January 31, I left a message for myself on my digital voice recorder: “It’s really fricking hot.” The same heat that wilted me, however, contributed to the healthy development of hundreds of thousands of bananas growing all around me, just to the north of Honduras, on a banana plantation in Quiriguá, Guatemala. I found myself in Central America because I had been invited to speak on a Scientific American–sponsored cruise in the Caribbean. (Yes, tough job, someone has to do it.) One of the day trips available to cruisers was to the banana fields. And I wasn’t going to say nah to bananas. (The previous day I observed howler monkeys in Belize, so bananas also completed a kind of cartoon symmetry.)

Our guide, Julio Cordova, informed us that this medium-size, 80-acre plantation and packing center fills five container trucks a day. Each truck carries 960 boxes. Each box holds perhaps a dozen hands. (What we call bunches are actually referred to as hands, with each banana a big yellow finger.) In the midst of the plantation, an assembly line of a few dozen workers takes apart huge bunches—the full banana assemblage on the tree—and converts them to the boxed, plastic-wrapped hands that will wind up on your table a week after being harvested. That work, on the “fricking hot day,” truly is a tough job that someone has to do.

Some of the banana leaves showed signs of black Sigatoka, a potentially deadly fungus. Koeppel explains, however, that copper sulfate was found to cure the disease (sometimes at the expense of the workers’ health). He also shares in his book these banana tidbits: what I just referred to as the banana tree is in fact the world’s biggest herb; the fruit is actually a gigantic berry. And although more than 1,000 kinds of bananas exist around the world, most of us eat just one kind—the Cavendish. And the Cavendish, my fellow banana-enamored, is slowly dying. Another fungus, called Panama disease, is coming for it.

The killer has struck before. In fact, today’s banana is a blander stand-in for the bananas our grandparents ate, a variety known as the Gros Michel, or “Big Mike.” Koeppel explains: “It was larger, with ... a creamier texture, and a more intense, fruity taste.” But our favorite bananas are all clones of one another. (Notice how delectably seedless they are?) Which means they lack any genetic variability by which some individuals may be lucky enough to ward off a pathogen. Panama disease had wiped out Big Mike worldwide by the 1950s. The Cavendish took over and was thought to be invulnerable. But, Koeppel says, “the Cavendish had never actually been immune to the blight—only to the particular strain of the sickness that destroyed the Gros Michel.”

No one wants the song lyric “Yes, we have no bananas” to be prophetic. So we are currently in a race against time to cure the disease, genetically modify the fruit or find a whole new banana variety. Because it is impossible to envision a world lacking a fruit with this kind of appeal.

Rising Powers, Shrinking Planet: The New Geopolitics of Energy

Author: Michael Klare
From Publishers Weekly
Looking at the "new international energy order," author and journalist Klare (Resource Wars) finds America's "sole superpower" status falling to the increasing influence of "petro-superpowers" like Russia and "Chindia." Klare identifies and analyzes the major players as well as the playing field, positing armed conflict and environmental disaster in the balance. Currently in the lead is emerging energy superpower Russia, which has gained "immense geopolitical influence" selling oil and natural gas to Europe and Asia; the rapidly-developing economies of China and India follow. Klare also warns of the danger of a new cold-war environment that would suck up resources that should go toward "environmentally sensitive energy alternatives." To avert catastrophe, he urges a U.S. diplomatic initiative to build collaboration with China (rapidly moving to second place in carbon emissions) to develop alternative energy resources, such as biodiesel fuels; ultra-light, ultra-efficient vehicles; and an innovative plan to use new coal plants, currently in-development, to strip carbon waste which can then be buried underground. Well-researched and incisive throughout, Klare provides a comprehensive but approachable overview of a complex problem, and offers promising policy alternatives to disaster.

When the Cold war ended, Americans generally assumed the U.S. would enjoy unchallenged preponderance in the world. Instead, Russia now has reemerged as a major actor and the U.S. has, in contrast, sometimes found itself cajoling foreign suppliers to increase output. Meanwhile, China's foreign currency reserves in late 2007 were $1.4 trillion, and rich Arab states recently invested $20 billion into Citibank.

According to the U.S. DOE, world energy supplies must increase 57% over the next quarter-century. This will not be met by increased alternative fuels - existing sources will provide 87% of the total need, but be harder to obtain.

Many believe this DOE projection of increased supply is optimistic - it counts on a 67% increase from Saudi Arabia. Nearly half of current oil production comes from 116 fields - all but four were discovered over 25 years ago, and many are showing signs of diminished capacity. Regardless, current consumption is double the discovery rate. As for alternative sources, it takes about 1 billion cubic feet of natural gas to produce 1 million barrels of oil from tar sands, as well as enormous quantities of scare water. (Gas finds are similarly declining - production is expected to peak soon as well, and this is not even counting increased demand due to Kyoto promises to use less-polluting fuel.) Corn is no cure either - considerable energy is used producing ethanol and it already is linked to substantial protests over increased food prices.

America's military used 1 gallon of petroleum/soldier/day during WWII, 4 in Gulf War I, and 16 currently in Iraq and Afghanistan.

Other trends are that oil control is increasingly moving into national hands (eg. Russia, Venezuela), and oil companies are increasing their clout (and profits) by moving into refining, transportation, and marketing. Klare also tells us that coal production is expected to peak in the late 2020's, and nuclear fuel availability to last only 40 years - again assuming no increase in utilization.

Still another problem: Increasing "gunboat diplomacy" (eg. U.S. fleet sailing through the Straits of Hormuz, China and Japan squaring off over a large off-shore gas field that both claim, new U.S. and Russian bases in the "stans," and alliances between various nations to protect oil interests), and arming of second/third-level nations in Africa and the mid-East by the U.S., Russia, and China.

Klare suggests the U.S. begin working collaboratively with China, and increased research on alternatives fuel sources. Conservation is another key opportunity - for example, Paul Krugman's 5/12/08 column points out that France uses only half the per capita oil of the U.S., and is hardly considered an impoverished nation.

High Wire: The Precarious Financial Lives of American Families

Author: Peter Gosselin

It would be a pity if Peter Gosselin’s new book, “High Wire: The Precarious Financial Lives of American Families,” gets lost in the current turmoil over subprime mortgages and deepening recession. He has done the most convincing job I’ve seen in capturing the failures of America to deal with a changing, complex and far less generous economy than it has known in the past. That economy, despite cyclically painful periods, was so generous compared to the rest of the world over its 200-year history in terms of the rate at which it expanded the typical American’s standard of living that the country’s national character was formed by it. The resulting tendency in America, though thankfully violated from time to time, is decidedly toward a laissez faire philosophy of government.

But that national character is now being tested in a less friendly economic environment. Are America’s reflexes, honed over a couple of centuries, up to the task? It is not clear.

Peter Gosselin’s admirable objective is to show how many people of all income levels are now insecure and afraid in an economy that Americans are constantly told, by Republicans and Democrats alike, has long been back on track. At least, that was the conventional wisdom until a year or so ago, when the current hydra-headed crisis emerged. But, in truth, the American economy has not been on track for a generation now. Even the Clinton interlude was, as we now know, prompted by intense and unsustainable financial and housing speculation.

The main theme of Gosselin, a veteran reporter for the Los Angeles Times, is the rise of deep-seated financial, health and material risk. He gathers the many pieces of the new economic America together quite beautifully, even elegantly, and brings them alive with interesting and not the usually predictable individual examples. I learned many things in this book, and I’ve been covering this territory for a long time.

Take pension and health-care coverage. Most of us who read about these matters know about, and too many of us have already lived through, the growing failure of America’s pension and health-care system. Americans depend on having a good job for having a good pension. Now pensions are being frozen by major companies like IBM, many industries from autos to airlines are on a downward slide and their pension funds won’t pay off, and the Enrons of the world caused many to lose hundreds of thousands of dollars of retirement savings through fraud.

Less well known, half of Americans work for a company today that offers no retirement plan at all.

And then there are the 401(k)s. Gosselin says the major shift in America toward a riskier society regards retirement. Three out of five employees who are fortunate enough to have a private retirement plan now don’t have a pension at all but rather a defined contribution plan like a 401(k) to which they must contribute, and then manage the money. Many and probably most will save too little and invest unwisely. As for health-care plans, co-pays are going up, employees are losing coverage and the health plans don’t pay off as they promise, the latter a scandal that needs far more airing.

As for health care, few can remotely afford a policy that is not financed by the job. And more than 15 percent of Americans have no health insurance, anyway. Many of those work or are in a family with a worker. The deaths caused by lack of insurance should startle the nation.

But what makes Gosselin so interesting is that he digs further for the pertinent government failures. For example, the Employee Retirement Security Act (ERISA), passed in 1974 originally to protect workers, now, as he writes, protects big companies. The reason is that ERISA prevents companies from being sued by employees. In the current age, “[ERISA] has become a crucial vehicle for shifting economic dangers that our employers once helped us manage onto our backs.” And then Gosselin gives a few poignant examples of the injured parties. Like the woman, Debra Potter, who was denied medical coverage though she had multiple sclerosis. (ERISA’s reach has been expanded to include health-care coverage.) She couldn’t sue to get her benefits and got far less than needed. I for one was not fully aware of this outrage.

A former insurance consultant told me recently that some employees are paid at insurance companies according to how many claims they can deny. I was shocked. Naive me, and after all these years. Of course, that is how the companies operate. Create incentives to maximize profits.

Gosselin’s central claim is based on some research he did to show that the proportion of American families whose incomes are likely to fall substantially has risen sharply since the 1970s. I can’t vouch for the methodology, but it seems correct on a quick reading (and he defends it persuasively against other views in a section on methods). More precisely, the probability that income for a family will drop by 50 percent in any two-year period has risen from one in 20 families to one in 10. One in 10 is pretty darn high, and that’s in any two-year period. Over time, more will fall into the category. What’s more, there is much less chance of making a big comeback and rising to one’s old income level than there was 30 years ago.

Gosselin computes, using another methodology, that incomes in general fluctuate more—by as much as 26 percent on average for the typical family as opposed to 17 percent years ago. When families depend on two incomes, as many do today, such wide fluctuations make sense. Family incomes are up if modestly over 30 years, but mostly because the spouse now goes to work. If the spouse leaves the work force for whatever reason, the income falls sharply in percentage terms. That wouldn’t be bad if that income were just frosting on the cake, but spousal income is often critical to well-being now because wages have stagnated for so many.

Gosselin even makes a chapter on America’s poor sound original. The poor are not different—they are like you and me, he says, simply trying to make ends meet and get a life, especially for their kids, and even hold in their hearts a hope for the American dream. He finds conservative claims that we have conquered poverty nonsense. Gosselin is a little too optimistic that “deprivation” has been eliminated in America, as some conservatives like to say. How poorly those in poverty eat we now know. Diabetes is up, not because the poor are literally hungry—some in America do go hungry, by the way—but partly and maybe largely because bad food is
almost always so much cheaper and readily available than nutritious food.

Gosselin, however, puts his finger on it. Poverty is not about black-and-white deprivations in the contemporary world. The poor in America live in total chaos—in his words, “…—pay cuts and eviction notices, car troubles and medical crises, hirings and firings—that keeps reversing their families’ advances, rattling their finances, nudging them toward the economic brink.” Some have the audacity to say the poor can use their credit cards to bail themselves out of disaster. Yes, at 18 percent interest. Bring on the Mob! What do the poor borrow for? A good restaurant meal? A pair of impossibly expensive sneakers? Maybe, once in a while. But Gosselin looks into a case or two: $170 to fix the steering on the car, a $300 cash advance for the rent, another $1,000 to bring a wife to the U.S. from Central America.

On education, Gosselin tells us that a college degree doesn’t guarantee a good job but often lots of debt. On housing, he sniffed out the subprime dangers early. Regarding health coverage, he notes the usual problems of a health-care system dependent on the job: reduced coverage, higher co-pays. But he delves into the even more alarming scandal of policy cancellations and rescissions by supposedly respectable companies, a stunning and growing national disgrace that doesn’t receive enough attention.

Gosselin doesn’t get everything, however. There is the shocking level of child poverty in America, higher by most measures than anywhere else in the rich world. There is highly unequal quality of public education.

But, most important, there is simply the long stagnation in earnings, most obvious when we isolate males from females. Gosselin buys too easily into the notion that the American economy has, based on the conventional data like the unemployment rate and the growth rate, done well for a generation and that it is essentially financial security that is the issue.

Not exactly so. To be precise, the 30-something median male—in the middle of the distribution—makes less after inflation today than did the 30-something male in the 1970s. As some perceptive commentators put it, the typical male today makes less than his father did 30 years ago.

This needed more attention in an otherwise excellent book. In other words, typical men have made no progress compared with typical men a generation ago. This experience violates the true American dream, not the one about how we can all get rich, but the one about how, if we work hard, most of us will do better over time than the previous generation. We can’t all rise higher on the pyramid, but the whole pyramid can rise. In fact, that is what happened in the U.S. since the beginning. That is what made the nation special and its people optimistic. But now it no longer does.

Meanwhile, women’s wages are up, and that’s what has mostly kept family income rising. But there is still an enormous gap between what men and women earn, far more than in some European nations, for example. In Sweden, men and women make about the same. Labor market discrimination? You bet.

At least men haven’t fallen much behind in America, some will answer. Well, high-school-educated males have fallen behind by a lot. College-educated males have seen median wages stagnate for 30-year stretches and longer. Here’s some of my own data, done with the estimable researcher Nikos Papanikolaou.

Median Males: High School
(12th-grade diploma)

	Age 25-34	Age 35-44	Age 45-54
1979	$36,865	$42,358	$44,102
2005	$30,000	$37,550	$39,000

Note below that even typical men with a college education have seen no increase in earnings for 20- and 25-year stretches since 1969.

Median males: College
(Four years / degree)

	age 25-34	age 35-44	age 45-54
1969	$45,634	$54,760	$52,479
1979	$40,489	$54,816	$64,783
1989	$44,925	$54,731	$66,105
2000	$45,342	$58,945	$63,480
2005	$47,000	$63,000	$64,000

Data: Jeff Madrick and Nikos Papanikolaou, Schwartz Center for Economic Policy Analysis, The New School.

But more to the point, inflation-adjusted income, even if it rises slightly, does not mean that people are actually keeping up. The costs of education, health care, drugs and public investment have gone up much faster than incomes. So people can buy clothes, food or electronics more easily, but they can’t buy health care, or they have to move into an expensive house to get a good k-12 education for the kids. Or they can’t as easily afford their commuting costs. A subway ride in New York in the 1970s cost 35 cents; now it’s $2. That adds $50 a month to the commuting bill. This is why Barack Obama is right when he talks about bitterness and anger, and why claims that the political attitudes are only about culture shifts is wrong.

Now the experience of the 2000s has brought the message home. Wages haven’t gone up at all in the 2000s, despite record profits and decent productivity growth. Family incomes are down. These are unprecedented in the modern economy.

And all this follows a generation of rising insecurity, uncertainty, unrewarded effort and for many a treadmill of growing despair, cynicism and occasional chaos that this author describes so clearly, even elegantly. Gosselin’s gotten the new American condition better than anyone else I’ve read.

Jeff Madrick is editor of Challenge Magazine and senior fellow at the Schwartz Center for Economic Policy Analysis, The New School. A book of lectures, “The Case for Big Government,” will be out in June, from Princeton. He is also at work on a history of the U.S. economy since 1970, to be published by Alfred A. Knopf.