(Franciscan nuns in South Bronx)
In the nineties I was part of a wave of Investment Bankers and smart policy wonks that invaded Argentina. We had arrived, many under the auspices of the IMF, to convince Argentina to embrace the economic mantra of unregulated free markets.
Our days were spent lecturing “very important people” on the wonders of the markets. Nights were spent in fancy restaurants. After dinner Tango dancers would be dragged out to entertain us. We slept in five star hotels that could have been in New York City, except for the massive paintings of Gaucho’s riding on the Pampas hung on the walls
On one trip, as I was being driven to the airport, my cab was caught in a swarm of banners and megaphones: Political protestors from the neighboring slum.
Slums ring much of Buenos Aires. They are sprawling collections of small shacks built of tin, wood, cardboard and a few choice items discarded by the wealthy. They are carved out of oddly shaped plots of land that others don’t want, directly under an airports flight path or on unsteady land prone to flooding, or huddled next to busy train tracks.
With the cab stopped, the shacks clustered next to the road were no longer just a dark blur of concrete and reflective tin. They were homes. Sheets operated as doors, and on this summer night most were pulled aside to let in a breeze. Inside candles sat on tables or bare bulbs dangled from live wires. The stark light lit the faces of slight children.
A street of mud fronted a bar built of reclaimed wood. Inside a TV run by stolen electricity was showing a soccer game. The game flickered as the rabbit ears barely grabbed the faint signal. Empty beer cans littered the wooden table. A mother of Mary statue sat in a corner, surrounded by a collection of votive candles.
It was not a neighborhood anyone I knew would visit. It was, to paraphrase the local bankers, “a dangerous place filled with squatters who have no respect for the rule of law. They don’t recognize property rights. They don’t respect themselves, choosing to drink rather than work.”
During that period and for much of his life, the Auxiliary Bishop of Buenos Aires, Jorge Mario Bergoglio was regularly visiting those slums, trying to bring solace to the poorest of the poor. Since his election in 2013 as Pope, Jorge Mario Bergoglio took the name Francis.
Since that election, Pope Francis has focused much of his energy on highlighting what he learned in his work in the slums, that wealth inequality is one of the most morally corrosive issues the world faces.
Its an issue he knows well, after living his life in a country that has always had a large percentage of the population, many living in slums, that is voiceless, almost completely excluded from wealth and power. Most in Argentina don’t acknowledge the slum dwellers unless one of them, like Diego Maradona, reaches fame through his soccer abilities
Slums are the ugly side of a world economy that is tilted towards a “winner take all” mentality. Few want to look at the economic losers, not in Argentina, and certainly not in the US, the intellectual champion behind the “winner take all” policy of lightly regulated free markets.
In the US, since 1980, with the election of Ronald Reagan, the bulk of policy has been written for the benefit of the wealthy. Taxes have been made more regressive, labor laws relaxed, and markets deregulated. The policy shift profoundly changed the US, and the world, giving more power to those with capital at the expense of those who labor. Voters were told that growth, no matter how it was generated, would eventually lift all boats.
Free markets became the religion of politics, and economic growth, as measured by simple numbers like GDP, became its saint. Even Bill Clinton, the savoir of the left wing, became a free market acolyte, pushing through congress the middle class decimating NAFTA and then dismantling any remaining regulations of Wall Street with the repeal of Glass-Steagall.
The move towards free markets was personally good for me. In 1993 I joined a 5,000 person investment bank, Salomon Brothers, and watched as it transformed into a massive 200,000 person megabank fueled by lax regulation. Compensation at the bank also grew, with million dollar paychecks, more than my father made in twenty years of teaching, normal.
New York City was equally transformed. My apartment building in Brooklyn Heights changed radically. When I first moved in it housed a variety of residence: Artists, professors, social workers, schoolteachers, and a retired plumber. I was the only banker. Twenty years later the artist and many others are gone, victims of rising prices, and I am one of many bankers.
Free markets, and the right to consume, became the invisible hand that guided elections. Until the financial crisis of 2007 exposed the economic costs behind “growth at all cost.” That crisis enabled the election of President Obama, and the passage of the first major policy that was not for the benefit of only the wealthy: Obamacare.
The Obama administration spent much of its first term performing triage, attempting to arrest the damage done by the collapse of the free markets philosophy.
My bank lost close to 100 billion and was effectively bankrupt. The government stepped in, took over many of the ugly assets that had brought the bank to failure. Yet the bankers still got paid. More bankers moved into my neighborhood.
Now in his second term President Obama has stated that his focus will be the on most pernicious results of the last generation’s obsession with free markets and growth: A rapidly expanding wealth and mobility gap.
The resulting and growing chasm in wealth and opportunity between those with access to capital, and those without, shouldn’t have surprised anyone. When you pass laws that favor one group over the other, that group will win.
Economists, always a thoughtful lot when it comes to human behavior, knew the wealthy would benefit far more but argued that growth, even if unevenly distributed, will be a net benefit because the winners will win more than the losers lose. They will then share those winnings, either via investments that boost jobs and lower costs or from politically forced redistribution via taxes.
The sharing the winnings part never happened. The winners used their new wealth to further empower themselves. They did this by flooding the political system with money to further stack the rules in their favor. They didn’t invest, well not in job creating systems, but rather they moved production to places with the cheapest labor and the fewest regulations.
My employer, Citibank, a clear winner in the new economy, lobbied extensively to change banking regulation. It encouraged me and other employees to push their congressional representatives to repeal what little banking regulation existed. We would get regular updates on how we could fight to make the US safer for large financial institutions. They also encouraged us to spend one Sunday a year picking up garbage in a poor neighborhood. Plenty of photographers were on hand for that event.
As inequality grew the economists and politicians came up with a new argument, that income redistribution would happen organically, via some magical economic process called trickle down. It is a term that evokes images of rivulets of water seeping into a cramped basement apartment from the mansion above. That didn’t happen either.
Barack Obama, an academic himself, understands these arguments. Yet he also knows first hand the absurdity of their claims. During the height of the Reagan revolution, while Pope Francis was in the Argentine slums, a young Barack Obama was working in Chicago’s South Side as a community organizer for a church-based organization. He, like Pope Francis, was seeing the ugly result of the dedication to a “winner takes if not all then most” economy.
He was seeing that growth at all costs did not lift all boats. Headline GDP numbers were growing and despite the productivity of the average worker being up 90 percent, the income of the typical family was stagnating. That boom in growth and productivity was indeed benefiting the richest 1%, who since 1980 have seen their wealth grow at staggering rates.
He was also seeing, as anyone who has spent anytime in the poorest neighborhoods of the US knows, that not only was wealth inequality vastly increasing, but also more dangerously, mobility was decreasing.
Poor neighborhoods were becoming places harder and harder to escape. Places where children are born into a lifetime of limited opportunity and almost assured economic stagnation.
As the US moved itself, and much of the rest of the world, towards outright idolatry of unregulated free markets, the Catholic Church, a moral guiding force for many, did little to try and stem the rampant consumerism.
The church itself was moving towards the right, under the charismatic Pope John Paul II. Token statements addressing the new obsession with free markets were made, reminders that the church was imbued with the philosophy that all people are equal, regardless of social or economic statues, but the bulk of the Church’s energy was directed at helping to overthrow the nasty dictatorships of Eastern Europe.
It was a noble effort, and worth the energy. That those totalitarian regimes hid under the pretence of being pro labor (communist in name alone) only helped the arguments of the free market politicians, who could claim philosophical kinship with the Church.
Ronald Reagan and Pope John Paul II got along famously. President Reagan could overlay and co-opt his gutting of labor with the Pope’s efforts to give Eastern Europeans their personal freedom and liberty back.
When Reagan and John Paul met, both Obama and Francis were toiling away in relative obscurity, doing community organizing in some of the poorest regions of the world. Presently President Obama and Pope Francis are focusing on addressing the changes brought by the movement towards consumption and free markets.
Pope Francis has led the way, both in volume, in timing, and in clarity. His renewed focus, done in the language of ethics rather than policy, has brought needed and long overdue attention to the corrosive and dehumanizing effects of growth at all costs.
He, like Obama, is at heart still a community organizer, and wants everyone in the Church to be the same. As he wrote,
“I prefer a church which is bruised, hurting and dirty because it has been out on the streets, rather than a church which is unhealthy from being confined and from clinging to its own security.”
Pope Francis also has a clearer and longer understanding of inequality. For the simple reason that the slums of Argentina are far worse than Chicago’s South Side.
The history of Argentina, for roughly the last 100 years, is generally one of class warfare. It could be the poster child for inequality and social and class calcification. Corrupt oligarchs intent on maintaining their massive wealth and unchecked power have long ruled it. When their interests have been threatened they have turned to military rule.
At times labor has revolted and installed its own governments, often by force. Imbued with anger and driven retribution, they themselves end up doing little to correct the massive imbalances. Rather they follow the prior political pattern and grab their own share of resources, enriching themselves and their friends.
Argentinean politicians have little interest in the public good; rather politics is a means of personal enrichment. As one Argentinean economist told me, “We Argentines have a hotel mentality. We don’t live here, we are only renting this place.”
Those living in the slums certainly don’t feel ownership of the country, being almost entirely disenfranchised.
That narrow self-interest of the wealthy and ruling class is endemic of economies with long-standing wealth gaps and limited social mobility. Over time, unchecked by others, the rich end up have little interest in investing in the real economy, little interest in generating anything that trickles down. They end up only interested in maintaining their own position.
This is what Pope Francis knows first hand. This is the environment he grew up in, that he worked in. He knows just how morally and economically dangerous inequality is.
He knows this in visceral first-hand way. Pope Francis knows that the inequality we have in the US and Western Europe is bad, but will get much worse if nothing changes. He knows that our problems are embryonic relative to Argentina.
He knows that the US is moving towards a Latin American-style economy, one where the Koch brothers are multiplied many times over. One where the wealthy don’t just want more money or opportunity. Rather they want power. They want the political system to be run with the intent to guarantee that their wealth is never threatened. They want labor to be disposable, voiceless, and expendable.
I hope President Obama listens to Pope Francis when he talks about the tin shacks and mud streets of Buenos Aires. I hope the President listens to the Pope, not only because Francis has moral authority, but because he has far more experience and far more knowledge of the dangers of unregulated free markets and the resulting inequalities.
As the Pope wrote in “Apostolic Exhortation”
“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.”
A shorter edited version of this appeared in the Guardian: The Pope, Obama, and a former Banker…..