AMERICA'S TITANIC--THE GREAT RECESSION OF 2007

THE GREAT RECESSION--AMERICA'S TITANIC DISASTER

ECONOMIC INJUSTICE and SOCIAL CHANGE

April 15 of this year will be the 100th anniversary of the tragic Titanic disaster. Thinking about that event (and perhaps the popular British TV series Downton Abbey, in which the Titanic plays a significant part) I was struck by the similarities between the sinking of the great ship in the early 20th century and its impact on the years that followed, and the Great Recession of the early 21st century. Both man-made tragedies came at watershed moments in the history of their respective nations and each epitomized the errors of the age, poor judgement, underlying social injustice, and inequality of wealth-distribution.

In England, the early 20th century was a period of vast social, political and economic upheaval. By the time of Queen Victoria's death in 1901, the UK industrial advantage was in decline and other nations such as Germany and the US had their own competing industries. The world was a more competitive place for the English worker. The nation began a period of slowed economic growth which was to have dramatic and far ranging effects on its social system, politics and economy. The Boer War had just ended. New technology and inventions such as the light bulb, first commercial radio transmissions, the automobile and the new assembly line invented by the Ford Motor company which produced them, gave rise to a sense of optimism in the future and the inevitability of technological advance. Across the Channel in Europe, political and social discontent were the seeds which sprouted radical political movements such as socialism and communism. These movements reverberated around the world. In England, Lloyd George champion of the English working man was just beginning a long career of fostering the English system of social justice and welfare, which were in part designed to blunt the force of the more radical political solutions to economic injustice growing in central Europe, Germany and Russia.

It was with these circumstances as background, that on the night of April 15 1912, the largest, fastest, most luxurious passenger ship in the world, sailing on its maiden voyage and built to be "unsinkable" sank ingloriously in the cold Atlantic just less than 400 miles southeast of Halifax, Nova Scotia. The"Titanic'" named after the Titans (the twelve Greek gods of mythology) who in modern times have come to symbolize great size, but for the Greeks these gods had other characteristics. Names often do have deeper meanings and subtext significance. The Titans, were reputed to be the progeny of Gaea and Uranus. As to the name, some scholars suspect the word "Titan" may be derived from the Greek "temno" (to stretch) for according to Hesiod, the Titans "stretched out their power outrageously" (Hesiod, Theogony (207-210 BC).

The event, in which 1,517 perished, was an inglorious end to a luxurious ship. But as a manifestation of British engineering, British naval power and British society (for almost all of the passengers were of that nation) it was a symbol and microcosm of that state. The foundering of this Titan which "stretched" its power outrageously, also coincided with the end the age of opulence and optimism and the outmoded concepts of a rigid class society which spawned it, and which had obscured and submerged the social unrest, injustice and discontent of large swaths of the British population.

The vessel itself in its size, opulence, and on-board societal patterns epitomized the inflated and perhaps unjustified confidence in technology, the strictly stratified and unjust social system and outmoded concepts of the early 20th century, as well as the excess, opulence and luxury of the age. The ship was huge, (the largest in the world at the time) nearly 900 feet long, and with over 90 feet of beam and a gross weight of 46,330 tons. It's draft was nearly 35 feet. The designers included nine decks within its over 175 feet of height from keel to its four great funnel tops. Three huge bronze propellers pushed it through the water at a maximum speed of 23 knots or about 26 miles per hour. It could carry 3600 passengers (and crew) in three classes, but on its maiden voyage it had only 2,453 men women and children. On that fateful cruise there were 833 passengers in First Class suites and cabins, in Second Class: 614, and 1006 people occupied its Third Class cabins. Its life boat capacity of only 1200, was about half of its passenger capacity, and notably with none apparently for its sizable ship's crew, servers and staff. Its technology was at the zenith of its period. The vessel was epitome of all that was to exemplify British excellence. Its upper class facilities were the ultimate in luxury and opulence of the age. The first class section had a lending-library, a swimming pool, a huge barber shop and coiffure parlors for first class women, a gym, squash court, Turkish bath, and verandah cafe. The Cafe Parisien served French haut cuisine. A one way ticket (according to Wikipedia) would cost a first class passenger about $31,000.00 dollars in today's currency.

The vessel, as is well known, hit an iceberg and sunk within a few hours. After the disaster, reports of the crew and survivors, and government inquiries underscored the ugly facts concerning the nature of British society of that time. It clearly exposed the injustices and hypocrisy of Britain's stratified society. When the British press published the survivor lists it clearly showed how the rich and powerful in first class survived the disaster in far greater numbers than the more numerous bourgeoise and working class passengers in second and third class. The physical arrangement of the vessel with all the life boats situated on the upper, first class deck, where the fewest but "most important" passengers were, was one cause for the skewed survival pattern. The lifeboats, too few for all passengers, were found adjoining the first class cabins and suites and easily available for the women and children of these privileged few. But the third class passengers in the lower decks had to climb long, crowded and confusing stairwells and passages to reach the lifeboat deck----only to find that the boats we filled with others and many of them had already been lowered.

As the story of the tragedy played out in public press, the British nation had a clear, unsettling and unflattering view of itself. For the Titanic was a microcosm of British engineering, technology, and its rigid class-structured society. The privileged classes survived while the others went down with the ship into the cold Atlantic. The event crystallized in the minds of the disenfranchised and under-privileged of society and made it clear where they stood in importance in their homeland. The tragic foundering of the great ship which occurred off the coast of Halifax was a clear expose of what would happen in a national disaster to the lower classes of British society on the larger ship of state Britain tethered off the coast of France. That national perception gave the nation's underclasses pause...and soon ushered in new ideas concerning British social patterns and mores. The Titanic sinking acted as a stimulus which was to initiate drastic changes as a result of these revelations. Some of the developments the labor movement, greater impetus to improve social justice, men's suffrage and women's suffrage and the end of the power of the House of Lords to block progressive legislation.

The USA of the early 21st century, sailed forth on its own Titanic, the great financial ship of state which was like the Titanic new, huge, and totally a US product. It was based on new technology and had the complete and utter confidence (unfounded) in its continued safe sailing. As did the Titanic disaster, and its aftermath, the Great Recession in 2007-2010 occurred near the end of a two long, unnecessary and debilitating wars, at a period of rising inequality in incomes, and when the US nation was experiencing a flush of unrestrained irrational financial ebullience. The financial growth was fueled by increased business efficiency derived from new electronic technology, cheap labor from immigration, and increased numbers of women in the workforce, and development of complex securities known as derivatives (most importantly the mortgage-backed security). This latter derivative, was, as was other such "paper" assets, bundled together as "collateralized debt obligations"into more complex security offerings, but considered a boon to investors since this species of paper served to disperse risk over a large cohort and thus would (theoretically) decrease risk to individuals. Banks and other financial institutions eager for the rich financial rewards from these implements lobbied heartily to keep such securities free of government regulation. As a consequence, the shortcomings and weaknesses of derivatives were never adequately assayed. In fact, since mortgage backed securities were traded widely world-wide and were unregulated, their chief weakness was that their risk could not be accurately assessed. This fact led to disaster and greater global insecurity (when the housing bubble that these securities helped to create---burst and the economy collapsed). Greed of banks and institutions fed the growth bubble causing many to sell mortgages to sub-prime lenders. Eventually, these sub-prime mortgages (bundled in with good securitized debt) would constitute as much as a third of the total world collateralized debt. These high risk securities were spread far and wide across the world. Banks were not able to assess how much actual "junk" bonds were in the assets they had purchased.

But we have surged far ahead of our story. Prior to the crash of 2007, and until that time optimism was was the watchword of the day. Growth was seemingly assured and investors burbled about the economy continually expanding. The nation's low interest rates were controlled and maintained by a complicitous Fed, kept the view of business future bright and cheery. Some claimed that we had "mastered the business cycle" with deregulation and free, unfettered global markets.

But as in the Titanic disaster, the US ship of state sailed on unmindful of the hazards ahead or the weaknesses and injustices within its system. It failed to recognize the dangers of unrestricted and unregulated greed, or the growing inequality of income and wealth. Or of the fact that middle class workers, with stagnant incomes were increasingly using cheap interest rates to leverage up funds from the equity they had in their homes. Here too the globalized economy and one foreign nation in particular, China, which kept the value of its currency low and pumped out cheap products for the US domestic market added fuel to the fire as it worked in lock step with the Fed and the US government to sustain the unsustainable. Low wages, stagnant incomes forced families to send spouses and younger members into the workforce. People were working longer hours for the same pay and for decreased benefits. If a child needed support for college, a loan taken out on house equity might paper-over the shortfall in funds for tuition. If one's roof leaked, an equity loan could be secured to pay for it. The result was growing national debt. All of these economic weaknesses were masked by an irrational optimism and faith in the "new" unregulated economy. The US nation's Titanic. The nation kept spending and buying houses, paper assets and commodities at higher and higher prices while it kept partying on the ship of state which was set on a collision with an unseen mass in its path.

As in the Titanic disaster, when the "survivor-lists" of the 2007-8 disaster were published, America's middle-class and workers were faced with the facts regarding the aftermath and government response to find that all the big bankers and financiers and their political facilitators got into the "life boats" safely. Once ensconced, they commanded the Bush and Obama crew to quickly shove them off so that as the ship went down they would not be unduly rocked about by the turbulence caused when the big vessel actually slipped below the waves. They had the ship's crew row them to shore safely, and were reported all doing extremely well. Many had climbed out of their lifeboats with massive bonuses and, ignoring the faults of the old "Titanic" these wise investors immediately began rebuilding a sister-ship called the "Olympic" which was (some considered it unwise) designed by the same old architect on the same lines and of the same size as the old vessel, whose wreck lay clearly visible to all strewn, belwo them on the sea bottom. These events were vieweed by the water-logged second and third class passengers, who watched as they floated on a sea-surface littered with debris as the one-percenters rowed away.

Nothing had changed for the top-hatted, silk-scarfed, Gran Habano-smoking, first-class set. While the second and third class passengers slowly succumbed to drowning or starvation, the elite, one-percenters got to shore where they blithely went on buying new Lear jets, diamond encrusted Stauer Graves watches, Roger Vivier shoes for their ladies, and Delaware-sized estates in South America.

Soon the financial fires in the boilers were burning again and the Olympic, which now served only first class passengers (all lower decks were vacant) was launched and set sail again. It began its cruise on a smooth moon-lit sea, its bow-wave pushing through a sea, scattered with debris of the old Titianic, and the helmsman steered his unchanging rightward course, unmindful of small clusters of determined survivors still clinging to barnacle encrusted, made-in-China, wood crates in their path.

Get the picture?

rjk