To Galt’s Gulch They Go
Over the boom and through the bust . . .
[from The Baffler No. 22, 2013]
There was a time when Atlas would frown and the world of nations would tremble. He was as mighty as Zeus and as petulant as a teenager. His wrath was irresistible, and he was easily provoked. Badmouth him and he might just drop his burden and walk away. Elect someone he didn’t approve of and he’d put a lightning bolt up your ass.
Chile learned the hard way about minding the feelings of the business-class god. In 1970 that country selected as president one Salvador Allende, a socialist of the old school who quickly set about nationalizing banks, telecom concerns, and so on. American companies naturally feared these developments and laid plans to push the country down a different path. They would withdraw investments, executives mused; they would halt purchases of Chilean goods; and they would persuade others to do the same. President Richard Nixon, who was clearly thinking along the same lines, told his CIA director to “make the economy scream.”
And scream it did. Still, these were the early days of collective capitalist action, and there was a certain brutality and clumsiness to the proceedings. Not every American firm doing business in Chile went along with the program—the high-minded banks, for example, squealed about their policy of “non-involvement in the political affairs of the countries where they do business.” And in the end, Atlas’s goals for the Southern Cone were achieved only by means of an ugly military coup.
In later years, Atlas would grow more subtle in expressing himself, more refined. When François Mitterrand was elected president of France in 1981—another socialist pursuing an array of nationalizations and expanded rights for labor—there was no need for a junta of generals to intervene. Mitterrand pumped the depressed French economy full of Keynesian stimulus, but his nationalizations were too much to take: the private sector simply refused to play along. The New York Times spoke of an “investment strike,” rich Frenchmen moved abroad, and Mitterrand himself moaned about a guerre sociale conducted by the bosses. This socialist was no Salvador Allende: he came into office at the head of a good-sized majority, he presided over one of the largest economies in the world, and he was fully committed to the American-led security program of the era. But none of that mattered to peevish Atlas.
“You mean to tell me that the success of the program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?”
It took only two years for Mitterrand to capitulate. In 1983 he embarked on his famous economic U-turn, one of the most depressing episodes in the entire gloomy history of the neoliberal conquest. Economic orthodoxy returned to France in triumph. Entrepreneurs were celebrated. Labor unions went into a decline from which they have never recovered.
A similar episode took place in those days in Jamaica, where the socialist prime minister, Michael Manley, pleaded with the business community to invest, but without result: their mistrust was simply too great. Another unfolded in Canada, where large national corporations, according to one witness, threatened to pick up their marbles and go home unless Pierre Trudeau’s government abandoned plans to close certain tax loopholes.
And finally America itself got a taste of Atlas’s power. The immortal remark Bill Clinton addressed to his economic advisers shortly after being elected president in 1992—“You mean to tell me that the success of the program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?”—will stand forever as testimony to the power of the visible hand. Seven years later, the administration had been converted to the cause so utterly that it now rationalized the things Atlas did to states that dared to regulate: “In a global economy where capital can be invested anywhere,” quoth vice president Al Gore in 1999, “red tape is like an economic noose that says: if you send your investments here, we’re going to strangle them with bureaucracy, inefficiency, and forms, fees, and requirements you can barely even understand.” Even for Americans, certain conventional acts of public administration were now beyond the horizon of the permissible. By 1999, not even a red-baiter like Richard Nixon would have been able to escape the wrath of the business god, thanks to his worshipful hours at the altar of Keynesianism. Just let the infidel try his wage and price controls in the decade of “globalization,” and it’d be his economy that would scream.
In France they have a phrase for the inveterate hostility of financial interests to the political Left: the mur d’argent, a wall of money against which reformers fruitlessly hurl themselves. In English-speaking lands we use a more active term: we call it a “capital strike.”
The phrase comes down to us from a period of economic desperation and left-wing righteousness. Faced with a severe recession in 1937–38, officials of the second Franklin Roosevelt administration chose to blame a “strike of capital” undertaken for political reasons—a collective act of sabotage by the economic royalty. Today, of course, we know that the actual cause of that recession was the Roosevelt administration’s own abrupt clampdown on Keynesian stimulus, a policy it undertook in an ill-advised attempt to balance the federal budget. But the hatred for the super-rich ran hot in those days, and the class-war explanation for the slump is what sold.
A “capital strike,” according to the 1938 understanding of the phrase, is a highly unusual event: a coordinated action directed by people like the group that Roosevelt’s advisers called the “sixty families,” a term they borrowed from a conspiracy-minded bestseller of the day. This is also the version enshrined by Ayn Rand in her 1957 novel Atlas Shrugged, where it’s organized money versus the idiot pee-pul, only the moral poles are reversed, and the rich supermen masterminding the walkout are heroes rather than villains.
Were we to apply the term strictly, a “capital strike” would mean a confrontation in which the wealthy decline to take short-term profits in order to gain an advantage that might open up after the capitulation of the other side—meaning the left-wing politicians who always darken the horizons of the wealthy. This strict definition would also imply a certain amount of organization in order to maintain discipline—an owners’ committee, or a sort of radicalized Chamber of Commerce. Striking capital, defined this way, wouldn’t just want to get a better return somewhere else; it would be after political changes here at home.
In this narrow sense of the term—in which the business community comes together as a politically motivated cartel—capital strikes are fairly rare. But if we understand a “capital strike” more like an investors’ version of a union work-to-rule campaign—financiers go through the motions and show up for work, but their hearts aren’t in it—we start to see examples all over the place. Now a “capital strike” is just another name for everyday financial functions: the movement or idling of money that occurs when companies go looking for optimal business environments. When companies demand concessions from a city or a county or a state, for example. Or when rich people flock to a tax haven. Or when money flees a country that has started nationalizing certain industries. Or when lobbyists threaten to move an operation abroad if a certain regulation is enforced.
By this definition, “capital strikes” are everywhere, happening all the time. We are afraid to tax financial transactions, lest the home bases for our own financial markets decamp to swinging London. We dare not regulate credit default swaps, lest the geniuses who make them decide to “shift their activity to jurisdictions that provide more appropriate legal and regulatory frameworks,” as some official someone actually said back in 1999. A presidential candidate tells us we must give big banks a tax holiday, or else they won’t ever repatriate the billions that they’ve parked overseas. Each of these is a capital strike, as is the far less exotic spectacle of a company choosing suburbs over city or locating the site for its new plant in open-shop South Carolina instead of union-friendly Illinois. And they are, if we think about the matter this way, both common and extremely effective.
Whatever specifics we associate with it, the phrase “capital strike” is intended to be an expression of great contempt. It was the deed, declared Robert Jackson, a Roosevelt official who would later become a Supreme Court justice, of an “economic oligarchy of autocratic, self-constituted and self-perpetuating groups,” which society had little power to control. Unable to get their way at the ballot box, these aristocrats now demanded it by threat of economic force. Their relationship with We the People, according to this picture, is one of constant extortion.
Of course, the preferred brand image for most businesses is precisely the opposite: pure, mystical oneness with the vox populi. The common man speaks and corporate America listens, in every situation giving the little people exactly what they want. No business wants to be seen as a peevish, grasping tyrant. The pro sports franchise owner who insists that taxpayers build him a new stadium, and skyboxes too, if you please, is hardly a beloved figure in American culture.
Unable to get their way at the ballot box, the aristocrats demand it by threat of economic force. Their relationship with We the People is one of constant extortion.
Over the last few years, however, certain reaches of the political Right have developed an outright cult of the capital strike. We can see it, for example, in the resurgent popularity of Atlas Shrugged and its reversal of the strike-novel tropes of the thirties. In 2011, John Boehner, speaker of the House of Representatives, characterized the economic slump as a matter of “job creators” being “on strike.” Before long, certain conservatives were even trying to flip the script of the Great Depression itself—announcing that what happened in 1937–38 really was a capital strike. In his syndicated newspaper column, Michael Barone, the coauthor of The Almanac of American Politics, has used the supposed capital strike of the Roosevelt years as a warning for Barack Obama no fewer than seven times since 2010.
Every news item, to these apostles of the capital strike, vibrates with the universal political chorus: Do what business wants! Do what business wants! Do what business wants! Or! Else!
Democracy is a problem, all right. Fortunately, entrepreneurs are at work on a solution.
Hence the grasping at stray news stories for any hint that the uprising of the moneyed is finally on. Phil Mickelson, a golfer who makes almost $48 million per year, announced in January that he was considering moving out of California due to high state taxes there; the Right leapt for joy to hear it, with an editorial in the Wall Street Journal urging this man who chases a little white ball for a living to “vote with his Gulfstream” and find some low-tax somewhere to sulk in.
Libertarians cheer to see Gérard Depardieu, a star of the French film industry, give up his French citizenship in order to avoid paying the higher taxes imposed by the country’s new Socialist government. They roll over with Randy ecstasy to see Bernard Arnault, CEO of LVMH and the richest man in Europe, apparently do the same. In both cases, these poor tax refugees, along with their bold billionaire friends, are said to be “going Galt.” In fact, this is the second time Arnault has deprived the ingrate patrie of his genius: he also ran bravely away back in 1981, when Mitterrand got elected and frightened everyone out of their wits. In the fullness of time, however, Arnault returned to France, where the Mitterrand government kindly helped him to take over a floundering textile conglomerate; Arnault promptly dumped the less profitable divisions of the enterprise, and thus launched—with government help—his empire of tawdry luxury brands. Depardieu, for his part, has enjoyed a long career in the heavily subsidized French film industry, appearing in such government-backed winners as the Asterix movies . . .
Ah, but I see I am beginning to wander into one of the perennial dead ends of writing about the Right: thinking that contradictions matter. In truth, Atlas just doesn’t care about such boring details. I mean, how many times have we heard that some libertarian hero earned his pile in Stalin’s U.S.S.R, or made millions off some invention pioneered for him by big government, or spent his entire career at some business-subsidized think tank, never once venturing out into the “free market” that he prescribes ritualistically for everyone else? Libertarian hypocrisy is an old story—and in the bubble world of laissez-faire, it’s a story that counts for nothing.
Instead, what conservatives wonder—what confounds them utterly—is why no one is making the economy scream over here. Inside the bubble of libertarian purity, everyone knows we are suffering under the thumb of a tyrant who is worse than Mitterrand, worse than Pierre Trudeau, worse than Michael Manley—maybe even worse than Allende. You might point out to them that personal taxes are still relatively low in America; that we just finished bailing out the banks; that the stock market is booming; that organized labor is weaker today than it has been since the year 1900; that businesses get whatever they want from state and local governments; that the free-trade agreements just keep coming . . . none of it would make any difference. Inside the bubble, everyone knows that fundamental American values are under attack, that average people are persecuted by arrogant college professors and power-mad bureaucrats, that the free-enterprise system is breathing its last. Inside the bubble, this is a matter of complete conviction. It does not require proof.
What it requires, given our failure to unseat the dictator Obama by conventional means, is action. Direct action.
But where are the leaders? Why is Atlas allowing this to go on? Why isn’t Wall Street issuing ultimatums to the Kenyan commie? Why aren’t the fucking bond traders crushing his program? Why has business investment grown almost 8 percent a year for the past three years? I mean, come on: Is a sulking pro golfer really the best we can do? Inside the bubble, none of it makes sense.
How can you arrange matters so you won’t have to endure the will of the majority, but they and their beloved state will still have to protect you?
The only possible answer is that corporate America has become so devitalized, so compromised by the tyrant’s cash, that it can no longer fight. Big business has dropped the torch; only small entrepreneurs can save the situation, can restore the dream to the parched desert of statism. And so have flowered a hundred wild schemes in which lesser individuals imagine how they might withdraw from the life of the nation and rouse Atlas from his slumber. “How many times since Obama came to power has withdrawing your services sounded like a good idea to you?” wrote an essayist recently on one prominent right-wing website, noting that he was speaking to anyone who “works hard to make more than $200,000 a year in a small business.”
Yes, strike! Strike! Strike! But how? How can you “withdraw” the “services” that net you such an admirable annual haul without, you know, actually endangering your bank account? How can you arrange matters so you won’t have to endure the will of the majority, but they and their beloved state will still have to protect you?
Democracy is a problem, all right. Fortunately, entrepreneurs are at work on a solution. And all their innovations point in one direction: withdrawing physically into some libertarian laager—some mountaintop or island or remote state—where free-market principles will be observed with the zealotry they require.
There are, for example, several different plans floating around out there to launch a free-market hideaway named “Galt’s Gulch,” after the fictional place Ayn Rand’s fictional billionaires went to hide during their walkout. One of them is in Chile—made forever safe by that early, bloody act of free-market utopianism—while another, following closer to Rand’s text, is located in Colorado, which its organizers hope to make a center for the “Asset Management” industry.
Glenn Beck, the Constitution-minded conspiracy theorist, is also promoting a model town/theme park where entrepreneurial genius can “retreat from the world” and where all the civic gods of the nineteenth century will be restored to their rightful place. Oh, there will be TV studios, small businesses, a church, and freedom by the bushel. Beck has of course referred to it as a real-life Galt’s Gulch, and has compared it to Disneyland—or what Disneyland was meant to be before it sold out. What a combination: a veritable Skousenland.
Another model libertarian town, “the Citadel,” builds on three of the lousiest ideas in city planning, each making the others even worse. This burg, intended for an Idaho fastness, is not merely to be gated. It will be a medieval-style walled village—like Carcassonne, I suppose, only minus the nineteenth-century improvements. It is to be an American suburb, only without the rules about recycling or architecture. It is to be a factory town, like Pullman, only one that manufactures guns instead. Don’t let this last fact scare you, though. Although everyone in the Citadel is expected to be a crack marksman, there will surely be no hostility between factory owners and factory workers, since the prospectus warns “Marxists, Socialists, Liberals, and Establishment Republicans” to live somewhere else.
Then there are the usual libertarian schemes to launch a microstate in the middle of the ocean, or in space, or by seceding from the union, or by luring so many wingers to a given area (New Hampshire; the mountains of North Carolina) that its flavor is permanently altered. There’s a group of American management thinkers who want to (and probably will) carve privately owned cities out of the country of Honduras—itself delivered to “freedom” by a good old military coup in 2009—in order to set up their own free-market utopias.
Places like Kansas are enthusiastically entering what economists used to call the “race to the bottom,” aiming to cut taxes to zero in the complete assurance that this is how you win the peripatetic billionaire’s favor. (And don’t fear the state’s regulatory apparatus: they’re only keeping it around to harass abortion clinics.) Legislators in Hawaii, meanwhile, have discovered a detour to the ocean floor, proposing that the state compete for the favor of the peripatetic celebrity by cracking down on annoying newspaper photographers.
A real estate developer in Michigan has dreamed up a plan in which an island off the coast of Detroit becomes an independent commonwealth and thereby transforms itself into a second Saipan, where taxes are low, schools are private, and everyone is rich (it will cost $300,000 a head to join up). The main industry in this magical place will be the good clean businesses of finance, real estate, and more finance—mmmm, you can almost see the money and the talent fleeing there already. And so packed with quality will it be, this bantustan of the rich, that it will ironically spark a revival of the city from which it has hived itself off. Unless a resentful Canadian navy has blasted it back to wilderness by then, of course.
What do you call it when average people try to mimic the behavior of bond traders and the great corporations, withdrawing into a fortified enclosure the moment they don’t get their way? Is it really Disneyland or Hong Kong? Isn’t Dubai more like it? Or apartheid South Africa? Or the Branch Davidian compound? Or maybe Brook Farm, reconfigured for the Bushmaster set?
There are the usual libertarian schemes to launch a microstate in the middle of the ocean, or in space, or by seceding from the union.
As I read over the plans for these nasty little anti-utopias, these projects born of delusion compounded by delusion, I can’t help but think that the closest parallel is to be found in the first half of the nineteenth century, when ideologues of white supremacy launched private military expeditions in order to peel away pieces of Central America for the slaveholding American South—and then, when those endeavors failed, built their whip ‘n’ chains utopia by seceding from the insufferably righteous United States, which had just chosen as president a man they all knew to be a crazy radical. If a work of inspiring fiction is required, the utopians might consider F. Scott Fitzgerald’s story, “The Diamond as Big as the Ritz,” in which a Southern slave owner moves, Galt-like, to an uncharted valley in remotest Montana, convincing his human property that the Confederacy won the Civil War and thus, through a clever falsification of history, managing to keep them in bondage while he himself grows fabulously wealthy. After all, if the truth won’t set you free, well, then neither will Atlas.
The larger question of the capital strike will still be with us long after each of these schemes lapses inevitably into failure: Who really rules in this republic of ours? The people and their elected representatives? Or the crotchety god of private business? From campaign finance rules to free trade agreements to the Internet itself, it seems sometimes like nearly everything has been designed to empower business further, to persuade the self-righteous rich that they need tolerate the bullshit of democracy only in tiny amounts. We laugh today at Glenn Beck’s desperation to withdraw into a Jeffersonian Disneyland of his own. But tomorrow, when the bond traders are back on their feet, the joke assuredly will be on us.
Thomas Frank is founding editor of The Baffler and the Easy Chair columnist at Harper's Magazine.
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