On the Economy
WTO protesters were right
The Battle in Seattle in 1999 is a hinge between eras, a shift long in the making and now heavily upon us with downsides and unintended consequences that can't be easily undone.
Special to The Seattle Times
I didn't live in Seattle a decade ago. From across the continent, my first reaction to the violence at the WTO Ministerial Conference was: Why would anyone smash up the downtown of my favorite American city?
Most of the nation likely reacted with similar distaste, or worse, confirmation that here was the weird left-coast being, well, weird and thuggish. That's too bad.
The peaceful majority of protesters represented issues that deserved a searching national debate. If they had gotten it, the country might have avoided many of today's calamities.
Or maybe not. Whatever the "battle" means to locals, historians should remember Seattle 1999. It is a hinge between eras, a shift long in the making and now heavily upon us with downsides and unintended consequences that can't be easily undone. The protesters can say, correctly, "You were warned."
It was 1999, after all. The nation was prosperous, mostly at peace, distracting itself with day trading and the dot-com fad. The federal government was headed toward its first surpluses in decades and the worry was about the future of Treasury securities with so little debt to sell.
Creative destruction ruled, but seemed benignly exciting unless one worked in boring blue-collar industries. Companies slashed jobs, but other jobs were waiting in abundance.
Even though more workers were losing traditional pensions, we were becoming a Shareholder Nation. The financial advantages once available only to the well-off, from stock ownership to deep wells of credit, were now available to average Americans.
It was the New Economy, where stuffy measures of corporate reality such as P/E ratios and net income were meaningless; levitating technology companies created their own value even if we couldn't understand how. Business cycles might be a thing of the past, we heard. America was the world's largest trading nation.
Part of this came crashing down in 2001, revealed as an artifice of corporate fraud, wishful accounting, "irrational exuberance" and an interest-rate bubble from the Federal Reserve.
It was followed by a long jobless recovery and a decade of stagnant wages. Then the great housing bubble and crash and here we are, with no more jobs than we had in 1999. Alas, the genuine strengths of that fateful year are gone, too.
The reality is that much of what was protested in Seattle not only became our fate, but it was being wheeled into place long before the Ministerial Conference.
For example, Glass-Steagall, the Depression-era banking law meant to prevent commercial banks from taking too much risk or gambling with investments, was being weakened as early as 1980.
It was completely repealed in 1999, a move backed by President Clinton. The "financial services" industry spent as much as $350 million on lobbying and campaign donations to make this happen.
Other deregulation ensured a light touch regarding derivatives, those securities of uncertain value, some pioneered by Michael Milken in the 1980s.
Most of the nation's leading economists endorsed these moves, downplaying potential risk. This was conveyed largely without skepticism, I am ashamed to say, by most of the nation's business media.
The commoditization of jobs was also not a threat but a reality. Most unions had long been slowly dying or becoming irrelevant, repeatedly weakened by law. Worker protections had been gradually eroding since the 1980s. With Clinton's health-care humiliation in 1993, America continued as the only advanced nation without universal coverage. The late 1990s boom concealed these rotting supports of the middle class.
Globalization was a major theme of the protests. Yet it was the world order created by the U.S. after World War II, on the premise that expanding trade would make war less likely and spread prosperity. It worked, at least to America's net benefit for more than half a century, with only isolated warning signs in the auto, steel and textile industries.
Most people supported "free trade" then, even though it was increasingly managed trade with many loopholes and the bomb ready to detonate under the American jobs machine.
This was a classic example of failing to prepare for discontinuity. Our net-winner status would quickly erode — beginning with China's entry into the World Trade Organization in 2001, a rising power that would play by its own rules and become our stern banker.
Finally, long before the armies of the night gathered in Seattle, the post-Paul Volcker Federal Reserve had shown a willingness to keep credit cheap to maintain what proved to be fleeting gains. Alan Greenspan, an acolyte of Ayn Rand, personified the worship of the "free market" that remains our guiding ideology yet it is actually a market of bubbles, costly bursts, a casino on Wall Street and America deep in the hole.
So it's an open question whether the most peaceful, articulate protests in Seattle would have made a difference. Americans didn't want to listen. Most of the media didn't care to tell such complicated stories. And the American hard left, as opposed to the still robust hard right, had been shrinking toward nothingness for years.
Now we must live in the post-Seattle 1999 world.
You may reach Jon Talton at email@example.com
About On the Economy
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest