TPM Cafe: Opinion

This article is part of TPM Cafe, TPM’s home for opinion and news analysis. 

Our broken campaign finance system allowed two Soviet-born men to use laundered political contributions to buy an audience with the president, and to make the case for warping foreign policy to advance private personal and political fortunes.

This little-noticed component of the impeachment inquiry offers a snapshot of how wealthy special interests use money to make their voices heard. And it further illustrates how the U.S. Supreme Court got it wrong in decisions like Citizens United that made this big money political spending possible.

In April of 2018, the two men, Lev Parnas and Igor Fruman, had an intimate dinner with President Donald Trump at the Trump International Hotel in Washington D.C. They turned the conversation to Ukraine, and urged the President to fire the U.S. ambassador to that country, Marie Yovanovitch.

Parnas and Fruman were indicted on criminal campaign finance charges last month.

According to prosecutors, the pair were pushing for Yovanovitch’s removal “to advance their personal financial interests and the political interests of at least one Ukrainian government official with whom they were working.” Ambassador Yovanovitch was reportedly viewed as an obstacle to Parnas’ and Fruman’s corrupt plans to restructure the state gas company to advance a natural gas import scheme.

So how did this self-interested pair, who have a history of failed businesses and connections to European organized crime, score a personal audience with the President to make this pitch?

They promised a six-figure donation to President Trump’s super PAC, America First Action.

America First Action arranged the April 2018 dinner, where Parnas, Fruman, and a dozen other top donors “dined and chatted about their pet issues with the President for about 90 minutes.” This was not a one-off event. It was part of a series of face-to-face meetings that the President has granted to big super PAC donors that have continued through today: just a few weeks ago, for example, President Trump hosted a “private roundtable” with donors who gave six figures to his supposedly independent super PAC.

To be sure, not every big donor is buying access to push a corrupt geo-political scheme to undermine U.S. foreign policy. Some donors just want to pay less in taxes. Others push more parochial matters.

But a system that trades six-figure political donations for access means that only the wealthiest few can afford to make their voices heard. The vast majority of Americans will never have hundreds of thousands of dollars to give to the President’s super PAC – and as a result, they’ll never have the opportunity to meet face-to-face with the President to describe how, for example, the cost of prescription drugs impacts their family.

In this particular case, Parnas and Fruman bought access with illegal funds. They laundered their $325,000 super PAC contribution through a shell corporation, triggering Campaign Legal Center’s July 2018 complaint, which helped lead to their arrest last month. But if the pair had just given to the super PAC in their own names, their purchase of a Presidential audience would never have drawn prosecutors’ scrutiny.

The cash-for-access transaction itself was perfectly legal, and far too commonplace in our big money-dominated political system.

What’s more, the big money that bought dinner with the President went to a super PAC that was supposedly independent of his campaign. Remember, when the U.S. Supreme Court paved the way for corporate-funded super PACs in its Citizens United decision, it did so under the assumption that they’d be “independent” of candidates, and promised that such independence guarded against any risk of actual or perceived corruption. But when President Trump affords direct access to those six-figure donors who give to his “approved” super PAC, that super PAC is anything but independent.

And when only the wealthy few can have their voices heard in our democracy, these transactions sure do look corrupt.


Brendan Fischer is the director of the federal reform program at the Campaign Legal Center. 

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This article is part of TPM Cafe, TPM’s home for opinion and news analysis. 

I forget the exact date, but sometime during my time as a student at Ohio University, I stumbled across this 2008 blog post listing gross profit margins of Gannett-owned newspapers and lost my mind.

It was 2011 and most of my journalism-major peers were filled with dread over job prospects. Newspapers were shedding staff at a rapid clip and nobody was quite sure what to make of newer digital media outlets like Politico, Talking Points Memo, and the Huffington Post. So when I came across this blog post, I was shocked.

The blog post listed double-digit profit margins for Gannett-owned newspapers large and small across America. This kind of profit margin is rare in most industries — and journalism isn’t known as one in which owners rake in the big bucks.

In the years after those profits were posted, newsroom jobs continued to fall. Recent numbers out from the Pew Research Center found that the number of newsroom employees at newspapers in the U.S. halved between 2008 and 2018, from 71,000 to 38,000.

Given those huge profits in 2008, how in the course of a few years did an entire industry collapse?

You’re likely familiar with the excuses that media executives have provided, generally blaming the decline of print advertising. Over the years Google, Facebook, and Craig Newmark, who founded Craigslist, have all served as scapegoats.

Advertising rates did decline, this is not a lie. But it’s also not the whole truth. The people who own and operate journalistic outlets could have done something to at least mitigate the devastation that came with those falling ad rates.

But, generally speaking, saving journalism was not the goal. Profit was and is the goal.

Even as falling advertising revenues offered a warning of hard times ahead — a canary in the coal mine — owners generally focused on profitability, not sustainability of journalism. The relentless search for profit in the news business continues today, leading to beloved news outlets collapsing left and right.

I firmly believe that until journalists are in some form and fashion in control of the organizations they work for, the cycle will not end. Sure, there are non-profits but, as Nathan J. Robinson explains well here, it’s not just profit that is the problem. It’s ownership.

I’ve long thought it peculiar that news outlets had executives who were not journalists themselves. Journalism is a trade. When I look around at the carpenters or stone workers or lawyers I knew growing up, the tradesmen ran their own companies. They didn’t hire MBAs to come in and run their plumbing operation. I could understand how newspapers and other media had become so large it would require specially trained journalists to manage operations and finance and those sorts of things. But there is really nothing about running a media company that is brain surgery. (I know this from running a media company and also having had brain surgery.) That’s not to say it’s not challenging — it is, but to the degree it is difficult, there is nobody better suited to solve the problems than journalists themselves. As Megan Greenwell wrote at the now sadly defunct Deadspin, “The tragedy of digital media isn’t that it’s run by ruthless, profiteering guys in ill-fitting suits; it’s that the people posing as the experts know less about how to make money than their employees, to whom they won’t listen.”

*       *       *

The business challenge that faces journalism is not one of technology or “scale,” as we so often hear from media executives. The problem is that journalism is an essential public good that is expensive to produce.

On one hand, we need as much information freely available to the public as possible, but on the other hand, we need to pay for the people and platforms necessary to make it public. Ordinarily, an industry that was critical to the public but was not economically sustainable would be the province of state intervention, like a utility. But of course, the very nature of journalism — which is often adversarial to any institution with power — makes basing the entire infrastructure on government support impractical.

Yet relying on the free market has not worked out well for journalism this decade either. Too often, Jacob Weindling points out in a recent essay on the decline of Deadspin for Paste, we assume the free market will save us. “We have been sold a lie in America, and the lie is that all we need to do is throw more capitalism on a problem and it will solve itself,” he writes.

To believe the free market will save journalism or could save journalism is to fundamentally misunderstand the intent of the free markets as currently constituted. These phrases like “capitalism” and “free markets” are a kind of shorthand to say, “The best products and services will win out. The competition will surely create some winners and losers, but the customers will be the real winners.”

But this is of course complete nonsense.

Let’s start with the basic premise that serving customers is the point. This is not necessarily the case. For decades, it’s been taken for granted that American corporations’ primary responsibility is to the owners, the shareholders — not the customers, not the employees. This widely accepted theory is often called the Friedman Theory, named after economist Milton Friedman, who introduced it in an essay for the New York Times, laconically titled The Social Responsibility of Business is to Increase its Profits. He did not beat around the bush. The idea is that the executive of a given company is acting as an agent for the investors, and therefore the ultimate responsibility is to increase returns for said investors.

Now, of course, when you’re talking about the news business, one could argue that the best way in the long-term to increase returns for investors is to do really good journalism that people want to support and pay to access. But you have to remember that investors can invest in any public company they want. If you, Media Executive, want to keep their capital in your business, you need to make them happy, and keeping investors happy, the current thinking goes, mostly boils down to one number: Earnings Per Share. This simple number is profit divided by the number of outstanding shares. Investors want to see EPS, as it’s called, going up. The continuing growth of earnings and the beating of expectations is what keeps investors’ money in the company coffers.

Executives go to great lengths to increase EPS, including just flat out lying, like CEO Jeffrey Skillings did at Enron. As the Economist reported in a 2001 profile of the company:

It now seems clear that growth in EPS became ever harder for Enron to deliver. So its laser focus switched to looking for accounting fiddles that would make it look as if EPS was going up, and also hive debt off its books. To that end, several off-balance-sheet entities were set up. These were not wholly independent of Enron, but were judged sufficiently separate that their profit or loss did not have to be consolidated into the company’s results. Assets, or portfolios of assets, were then “sold” to these entities.

Again, the point is RETURNS! Capitalism is about returns. It’s not about making the best journalism. It’s not about making the best phone. It’s not about making the best anything. To the extent good products come from capitalism, the goodness of those products is secondary to the pursuit of profit.

Journalism isn’t inherently lucrative. For years now, it hasn’t been terribly lucrative at all. The centrality of pressure to perpetually increase profits is at odds with the purpose of the craft.

When profit and revenue decline in this environment, the next move is often to make cuts to preserve those earnings. You don’t necessarily need more revenue for more profit, you can cut expenses, i.e. people’s salaries or the number of people getting paid salaries. But anyone in journalism knows that when you start to cut the number of journalists, you’re on a slippery slope to oblivion. Over the last 15 years or so, we’ve lost about 2,100 newspapers, and 171 counties in the U.S. don’t even have a paper, according to research by Penny Abernathy, the Knight Chair in Journalism and Digital Media Economics at the University of North Carolina at Chapel Hill School of Media and Journalism.

The cuts are not stopping. Most of what I’ve written about applies to publicly traded companies. But private equity firms that own journalistic outlets are even more focused on profit. Journalist Ken Doctor has doggedly chronicled the greed and loathing coming from the sector. Alden Capital, the majority owner of the odious Digital First Media, has become a poster child for the destruction. The firm owns daily and weekly newspapers across the U.S., including the Boston Herald, the Denver Post, the Detroit News, the San Jose Mercury News and the St. Paul Pioneer Press.

As Ken Doctor wrote in May of 2018:

Today we can reveal some key financial numbers from the very private company that shows just how successful Alden and DFM have been at milking profit out of the newspapers it is slashing to the bone. DFM reported a 17 percent operating margin — well above those of its peers — in its 2017 fiscal year, along with profits of almost $160 million. That’s the fruit of the repeated cutbacks that have left its own shrinking newsrooms in a state of rebellion.

Again, similar to Enron, as the chase for profit intensifies, the shenanigans get wilder. As reported by the Washington Post in April:

Alden Global Capital, a prominent hedge fund that controls more than 100 local newspapers, moved nearly $250 million of employee pension savings into its own accounts in recent years, an unusual move that is triggering federal scrutiny.

The hedge fund, which is the controlling owner of such newspapers as the Denver Post and Boston Herald under the brand MediaNews Group, in some cases moved 90 percent of retirees’ savings into two funds it controlled, according to public records filed with the Labor Department. Most of the money has now been moved back out of the hedge funds.

I mentioned above that in theory it’s all about investors. But when private equity gets involved, even investors stand to lose. But don’t take my word for it. Read what Leon Cooperman, famed billionaire capitalist extraordinaire who as recently as last week took issue with Elizabeth Warren being too mean to billionaires, had to say about another private equity firm that was tied to GateHouse Media, a company that owns hundreds of publications in 38 states:

I know we’re happy to get rid of Fortress, but I got to tell you, and I probably shouldn’t say this but I will say it, because that’s my nature of speaking what’s on my mind.

Basically, I was in the hedge fund business for 26 years. I only got paid when I made money for investors.

The kind of money that Fortress is walking away here with, and I know it’s not your doing. They brought this public in 2014 at $16 a share. The stock is $8.50, and they’re going to walk away with hundreds of millions of dollars. It’s just morally wrong, and they shouldn’t even take the money, given what they’ve done here.

And here is the real problem: Most of these executives don’t know what they are doing. They don’t know how to operate companies. They don’t know how to make products or services. They don’t know what good journalism is, they don’t care why it’s important. This is why they speak in banal, empty phrases like “we want to make and distribute content that people love” or “we want to make better experiences for our users.” They know how to financially engineer profits through mergers, acquisitions, and laying people off.

*       *       *

I used to wonder why these people who just want to make money choose an industry that isn’t about making money — that is a public service that often can barely cover its own costs. I think there are a couple reasons.

First, there was a period of about a hundred years that NYU Journalism professor and media critic Jay Rosen has called the “Golden Parentheses.” During that time, the news business was booming. This is largely attributable to regional monopolies established by newspapers. Putting an ad in such a publication was the only way for advertisers to reach an audience. This built on the model of the “Penny Press” established by Benjamin Day.

This era led into the venture capital boom days of recent past where it seemed like with enough capital, and some social media sleuthing, you could create a massive media company built on digital advertising. It was an era that gave rise to many of the news websites that have gone under, such as Mic, PandoDaily, and countless others. Obviously, this is fraught with risks from Facebook algorithm changes to realizing that media companies could be more profitable with evergreen, non-news “content.”

Take for example the famed pivot to video that many venture-backed organizations undertook. This was a grasp at salvation based entirely on advertisers’ love of video advertising. There was never any evidence that consumers wanted more video news. They might want video content. But not news.

Mashable laid off its news staff to pivot to video. Vice laid off at least 60 people as it expanded to video. Fox Sports, which I have a hard time believing is short on cash, laid off 20 to expand into video.

The reason why the pivot to video is so important historically — and is now a media business punchline — is because it so clearly illustrated the divergence between doing journalism and driving profit. It also showed how so many of the executives running VC-backed media companies were just chasing the shiny new thing in any attempt to generate the returns necessary to please investors.

But now, we’re getting back to how journalism worked for most of its existence. It’s expensive and it’s a labor of love. If we continue to allow people who do not care about journalism to run our companies, we’re in a lot of trouble.

I don’t have all the answers, I might not even have any. But I’m encouraged by the solutions many have either found or are looking into. The Salt Lake City Tribune recently was approved for non-profit status. Ken Doctor, the journalist who doggedly tracked Alden Global Capital, is starting a new company focused on local journalism, and the corporate structure will be a for-profit public benefit corporation, which means legally, profit is not the only consideration for management to consider. And there are a spate of publications such as my own employer TPM that are owned and operated by journalists.

Journalists need to work together to come up with these models. The future of journalism is challenging and difficult but it doesn’t need to be bleak. Competition and scoops are part of journalism, but we need not let the excessive, cartoonish devotion to competing hold us back. Journalism is at its best when it’s collaborative. Those of us who are fortunate enough to work on the publishing side of the industry should help educate and support journalists who want to make their own publications. We should drop the stupid idea of “entrepreneurial journalism” that implies it’s some kind of capitalist endeavor and simply begin training and teaching journalists about how publications operate, how the finances work, etc.

We got the news this month that GateHouse and Gannett, one of the largest newspaper chains in the country, are joining forces. This is huge news for reporters across the U.S., and their readers too. I’m sure they’ll try some snazzy PR blitz about how they love journalism and Nelly Bly is their hero and they miss Ida Tarbell but don’t let them fool you. From the New York Times article announcing the merger:

Douglas Arthur, an analyst at Huber Research Partners, questioned Gannett’s approach, noting that New Media Investment Group and Gannett had missed revenue projections in the most recent quarter. “The only way they can support it,” Mr. Arthur said, speaking of the newspaper industry in general, “is to cut costs. And it feeds on itself: Subscribers go down, advertisers pay less.”

It feeds on itself. It’s been feeding on itself for more than a decade.


Joe Ragazzo is TPM’s executive publisher.

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The following is adapted from Gregory P. Down’s book, The Second American Revolution: The Civil War-Era Struggle over Cuba and the Rebirth of the American Republic, reprinted with the permission of the University of North Carolina Press. It is part of TPM Cafe, TPM’s home for opinion and news analysis. 

To most Americans today, the name of the country’s 1860s war over slavery seems obvious: the Civil War. You see that name in textbooks, in local historical societies and in reenactors’ clubs, and hear it in radio ads for movies, hamburgers and furniture. That name is so widely used that it can seem inevitable. But in fact, Americans have not always called that conflict the Civil War. They once used lots of other names for it, and those names mattered. Those names captured aspects of the war that Americans now tend to gloss over because they raise big questions about what kind of country we live in. Once the most popular name in the North was The War of the Rebellion, but to white Southerners that name made it too clear who was at fault. By the late 19th and early 20th century, as white Southerners and Northerners looked for ways to paper over some of the past, forget the overthrow of Reconstruction, and adjust to a reunited nation based on segregation and disfranchisement of the former slaves, the name the Civil War became popular as a way of covering up all the messiness and confusion of the conflict.

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This article is part of TPM Cafe, TPM’s home for opinion and news analysis. 

It should be easy to determine who leads the Department of Homeland Security. But because the Trump administration has repeatedly failed to abide by the advice-and-consent process set out in the Appointments Clause of the Constitution, even Congress isn’t sure. In fact, former acting Secretary of DHS Kevin McAleenan — who announced his resignation on October 11 and left the agency in November — may have been in that role for seven months without any legal authority, meaning many of the actions taken by the department in recent months could be invalid and subject to legal challenge.

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The following is adapted from Chung Min Lee’s book, The Hermit King: The Dangerous Game of Kim Jong Un, reprinted with the permission of St. Martin’s Publishing Group. It is part of TPM Cafe, TPM’s home for opinion and news analysis.

In a move that was choreographed to a T, Kim Jong Un’s sent his sister, Kim Yo Jong, to attend the opening ceremony of the 2018 Winter Olympic Games in Pyeongchang, South Korea — it was a masterful PR stroke. She became the rock star of the games, with worldwide media recording her every move. This was the new image that Kim wanted to convey, namely, that North Korea was more modern and savvy. The Olympic thaw was openly welcomed by South Korean President Moon Jae-In, who vested virtually his entire presidency on building a so-called peace regime between the two Koreas.

What Moon and Kim, and ultimately President Trump, wanted to overcome was nearly seven decades of entrenched enmity between the two Koreas. Kim’s grandfather and the founder of North Korea, Kim Il Sung, launched the Korean War in 1950 that failed to communize the peninsula. But the war resulted in millions of civilian and military casualties. In the 1960s until the 1980s, North Korea tried to incite revolution in the South and undertook numerous terrorist attacks. In 1983, 18 members of then-South Korean President Chun Doo-hwan’s entourage were killed during a visit to Burma. More heinously, North Korean spies blew up a Korean Air Lines jet in November 1987 that killed 11 passengers and crew.

Even though Kim was reaching out Moon, the fact remained that North Korea has 1.2 million men under arms with a growing nuclear arsenal. South Korea’s 625,000-strong military was become increasingly modernized and buttressed by 28,000 U.S. Forces based in Korea. Was it possible to make real peace between the two Koreas?

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This article is part of TPM Cafe, TPM’s home for opinion and news analysis. 

For the better part of this year, House Democrats have been consumed by a battle over how best to use their newfound power. One side called for impeachment from the start. The other side insisted that Democrats focus on kitchen table issues like health care. But the choice has always been false; the House can and should do both. In addition to the active impeachment inquiry into Trump’s efforts to influence the 2020 election, there should be a second, no less serious impeachment inquiry into Trump’s efforts to undermine Obamacare.

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This piece is part of TPM Cafe, TPM’s home for opinion and news analysis.

Heading into the 2020 elections, Democrats need to place an emphasis on pro-democracy reforms that cement the right to vote. And if they are able to win back the White House and the Senate, the party must be prepared to take advantage of their progressive majority and pass these policies immediately.

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This piece is part of TPM Cafe, TPM’s home for opinion and news analysis. It is an excerpt from “Narrative Economics: How Stories Go Viral and Drive Major Economic Events,” out this month. 


The wage-price spiral narrative took hold in the United States and many other countries around the middle of the twentieth century. It described a labor movement, led by strong labor unions, demanding higher wages for themselves, which management accommodates without losing profits by pushing up the prices of final goods sold to consumers. Labor then uses the higher prices to justify even higher wage demands, and the process repeats itself again and again, leading to out-of-control inflation. The blame for inflation thus falls on both labor and management, and some may blame the monetary authority, which tolerates the inflation. This narrative is associated with the term cost-push inflation, where cost refers to the cost of labor and inputs to production. It contrasts with a different popular narrative, demand-pull inflation, a theory that blames inflation on consumers who demand more goods than can be produced.

As the chart below shows, the two epidemics, wage-price spiral and cost-push inflation, are roughly parallel. Both epidemics were especially strong sometime between 1950 and 1990. These epidemics reflected changes in moral values, indicating deep concerns about being cheated and a sense of fundamental corruption in society. According to the narratives, labor unions were deceitfully claiming to represent labor as a whole, when in fact they were representing only certain insiders. Meanwhile, politicians and central banks were selfishly perpetuating the upward spiral of inflation, which impoverished real working people not represented by powerful unions. There has been a long downtrend in public support in the United States for labor unions, from 72% in 1936 to 48% in 2009, as documented by the Gallup Poll.

Frequency of Appearance of wage-price spiral and cost-push inflation in Books, 1900–2008. These two related epidemics helped bring about major changes in labor relations and government regulation of business. Source: Google Ngrams, no smoothing.

These narratives were enhanced by detailed stories that invited angry responses. For example, around 1950 an outrageous story went viral about labor unions’ reframing their wage in terms of miles traveled rather than hours worked. The New York Times described it thus in 1950:

One of the rule changes asked by these two unions is that the pay base for trainmen and conductors on passenger trains be lowered to 100 miles or five hours, from 150 miles or seven and a half hours. The railroads have countered by asking that the basic day’s work be increased to 200 miles. . . . Because of recent technological improvements, including the greater use of diesel locomotives, the speed of passenger trains has been increased, where many passenger train service employes now receive a day’s pay for two and a half to three hours of work. By reducing the number of miles in the basic day to 100, the mileage rate of pay of the passenger train employes would be increased by 50 per cent.

So, the story went, the conductors would have the opportunity to sit down as passengers after working only two and a half hours, long before the trip was over. Such an outrageous demand made the narrative highly contagious, and it is memorable enough to be remembered today.

Labor unions became associated in the public eye with organized crime. For example, Jimmy Hoffa took over the International Brotherhood of Teamsters union in 1957, despite corruption charges against him then, and led that union as an absolute dictator. There was for years an ongoing story of his investigation for gangster-like activities, in a probe led by Robert F. Kennedy. Hoffa was convicted of bribery and fraud and went to prison from 1967–71. In 1975 he disappeared after being last seen in the parking lot upon leaving the Red Fox Restaurant in Bloomfield Township. Rumors were that he was murdered by rival gangsters. Rumors were that his body “was entombed in concrete at Giants Stadium in New Jersey, ground up and thrown in a Florida swamp, or perished in a mob-owned fat-rendering plant.” These colorful theories, which suggest vivid visual mental images of Hoffa’s ignominious end, led to the contagion rate of the Hoffa epidemic that further discredited labor unions. The search for his body in a garbage dump, an empty field, and elsewhere created news stories until 2013. This was a viral story, part of a constellation of narratives that described labor unions in negative terms, and which impelled many people to see real evil in them.

The wage-price spiral narrative was reflected in actual inflation rates around the world, which tended to be unusually high when the narrative was strong. The World Bank’s Global Inflation Rate peaked in 1980, approximately at the peak of cost-push inflation in the chart above, and it has been mostly on the decline ever since. These epidemics also saw high long-term interest rates, reflecting the inflation expectations engendered by the narrative. Today, inflation is down across much of the world, and long-term interest rates have fallen since the epidemic peaked. The dynamics of this worldwide narrative epidemic likely provide the best explanation for these epochal changes in trend of the two major economic variables, inflation and interest rates.

The end of the wage-price spiral narrative was marked by changes in monetary policy and the advent of newly popular ideas: the independent central bank and inflation targeting by central banks. The independent central bank was designed to be free from political pressures, which organized labor tries to exploit. Inflation targeting was designed to place controlling inflation on a higher moral ground than appeasing political forces.

The moral imperative here was strong. On its face, the wage-price spiral may seem purely mechanical. However, many believed it was caused by the greedy (immoral) behavior of both management and labor. President Dwight Eisenhower referred to the spiral in his 1957 State of the Union address:

The national interest must take precedence over temporary advantages which may be secured by particular groups at the expense of all the people. . . . Business in its pricing policies should avoid unnecessary price increases especially at a time like the present when demand in so many areas presses hard on short supplies. A reasonable profit is essential to the new investments that provide more jobs in an expanding economy. But business leaders must, in the national interest, studiously avoid those price rises that are possible only because of vital or unusual needs of the whole nation. . . . Wage negotiations should also take cognizance of the right of the public generally to share in the benefits of improvements in technology.

Even though 1957 saw only a moderate burst of inflation, from less than zero in 1956 to a peak of 3.7% in 1957 and far smaller than the 23.6% in 1920, it stirred emotions because of the moralizing narrative that attended it. A 1957 editorial in the Los Angeles Times exemplifies the reaction:

What is wrong with our country? A creeping inflation is like a small crack in a dam or dike as it grows menacingly larger by the force of the seeping water. The crack in our national economy is being widened by greed—greed of some leaders of big business and labor as they continue to boost prices and wages, each blaming the other, and neither pausing to realize that the economy of our country is at the breaking point with a crash being inevitable if we do not level off now and hold prices and wages. It may even be too late.

The moralizing in these narratives, spoken by presidents and prime ministers and published and commented on by journalists, gave the U.S. Federal Reserve and other nations’ central banks the moral authority to step hard on the brakes, risking a recession. They did just that, tightening money gradually until the discount rate rose to a peak in October 1957. Allan Sproul, the recently retired president of the Federal Reserve Bank of New York, in 1957 lamented the difficult role of the Fed as the “economic policeman for the entire community.” He noted the blame the Fed gets for the expansion before a crackdown:

As it is, there are times when your Federal Reserve System finds itself in the position of having to validate, however reluctantly, public folly and private greed by supporting increased costs and prices.

Dock workers hold up their union cards during a walkout, which helped cripple Great Britain in the greatest strike in the history of the world. (Getty Images)

Inflation in a Constellation of Injustice and Immorality Narratives

When inflation has been high, many commentators have regarded it as the most important problem facing the nation. Starting in 1935, the Gallup Poll has repeatedly asked its U.S. respondents, “What do you think is the most important problem facing this country [or this section of the country] today?” During the era of highest U.S. inflation, from 1973 to 1981, generally more than 50% of respondents responded by saying either “inflation” or “the high cost of living.” This perception appears to have been common across much of the world. Reflecting this view, economist Irving S. Friedman wrote in his 1973 book Inflation: A World-Wide Disaster that the increasing inflation was sending “panic signals throughout the world,” opining that the inflation crisis was as serious a problem as the Great Depression of the 1930s. Inflation was “eroding the fabric of modern societies” and “threatens all efforts to keep the international monetary system from fragmenting into hostile forces.”

The discourse seemed to want to fix blame on some segment of society, either labor or business, for the inflation. Popular syndicated columnist Sydney J. Harris wrote in 1975:

What is so frustrating about this kind of thing is the difficulty in pinning down the culprits, if any . . .

Either somebody is lying, or the whole economic process doesn’t make sense.

If labor is getting “too much,” why are most working families struggling to make ends meet?

If grocers are “profiteering,” why do they get glummer as prices go higher?

Where does the buck stop? Nobody knows. And so each segment blames another for the vicious spiral, and each justifies its own increases by pointing to its own rising cost of doing business.

the market no longer seems to control prices when they keep escalating despite reduced consumption.

Some strange new twisted law appears to be operating in place of the classical formula of the “free market.”

I am not versed enough in economics to understand what is going on; neither are most people.

In contrast to the 1920s, there were now multiple possible sources of evil behind inflation, not so focused on evil businesses of various kinds, but now also on evil labor.

In my 1997 study of public views of the inflation crisis in the United States, Germany, and Brazil, conducted after the worst of the inflation had subsided but during a period in which people remained concerned about inflation, I surveyed both the general public and, for comparison, university economists. My research uncovered differences in narratives across countries, across age groups, and, particularly, between economists and the general public.

For the most part, the economists did not think that inflation was such a big deal, unlike Irving Friedman, who was writing for the general public. Meanwhile, although U.S. consumers did not agree on the causes of the inflation, they were nonetheless angry about it. When asked to identify the cause of the inflation, their most common response was “greed,” followed by “people borrow or lend too much.” In specifying the targets of their anger, the U.S. respondents listed, in order of frequency, “the government,” “manufacturers,” “store owners,” “business in general,” “wholesalers,” “executives,” “U.S. Congress,” “greedy people,” “institutions,” “economists” “retailers” “distributors,” “middlemen, “conglomerates, “the President of the United States,” “the Democratic party,” “big money people,” “store employees” (for wage demands that forced price increases), their “employer” (for not raising their salary), and “themselves” (for being ignorant of matters).

In addition, unlike economists, the general public believed in a wage lag hypothesis: the idea that wage increases would forever lag behind price increases, and therefore that inflation had a direct and long-term negative impact on living standards. In short, the wage-price spiral offered a geometrical mental image of one’s economic status spiraling down for as long as strong aggressive demands of labor kept it happening.

In some ways the 1957–58 recession differed substantially from earlier recessions. It did not have the character of a buyers’ strike, as the Great Depression did. In fact, sales of luxury items remained very strong. Anger was not so much directed against “profiteers,” and there was little shame in living extravagantly. The alarmist talk about the wage-price spiral did not focus anger onto the rich. Rather, sales of postponable everyday purchases suffered more.

At the same time, the public sensed that no feasible government policy could stop the wage price-spiral. The earlier recessions of 1949, 1953, and 1957 had left inflation a little lower, but only temporarily. The lingering narrative of the Great Depression suggested to the general public that it was perhaps too great a risk to try to control inflation by starting a bigger recession. That idea was part of the popular conception of the wage-price spiral model, that the nation should base all of its economic decisions on the assumption that inflation will get worse and worse.

Picket line outside Mount Sinai hospital in New York in 1959. (Getty Images)

Angry at Inflation

Out-of-control consumer price inflation has occurred many times throughout history, and the phenomenon has always induced anger. The loss of purchasing power is extremely annoying. But the question is this: At whom should the public direct its anger? Anger narratives about inflation reflect the different circumstances of each inflationary period. By studying these narratives, we can see the effects of inflation and how they change through time.

The most extreme cases of inflation tend to happen during wars. When governments are in trouble, they may not be able to collect taxes fast enough to pay for the war, and in desperation they resort to the printing press for more money. But the stories may not resonate, and the public may not see or understand what is happening. That is, narratives that blame the government for the inflation may not be contagious during a war. Instead, it is more likely that people want to blame someone else. Businesspeople, who are staying home safely while others are fighting, are a natural target of narratives.

We saw the remarkable epidemic of the word profiteer during and just after World War I. People were very angry that some businesspeople were made rich by the war, and the result was the imposition of an excess profits tax (not only during World War I but also during World War II). Such anger against the people who get rich during wartime is a perennial narrative, not limited to the twentieth century. For example, there was anger during the U.S. Civil War (1861–65) at those who profited from the war, but it wasn’t directed at business tycoons creating inflation to make large profits. The narratives were different. Consider, for example, this sermon by Reverend George Richards of the First Congregational Church of Litchfield, Connecticut, on February 22, 1863:

How, in contrast with the greedy speculators, in office and out of it, who have prowled, like famished wolves, round our fields of carnage—stealing everything they could lay their hands on—robbing the national treasury—purloining from the camp-chest—pilfering from the wounded in the hospitals—appropriating to themselves the little comforts meant for the dying, if not stripping the very dead!

During the 1917–23 German hyperinflation, the inflation rate was astronomical, and not due to any war. Prices in marks rose on the order of a trillionfold. And yet many people were unable to identify the malefactor who was causing inflation. Irving Fisher, an American economist who visited Germany at the time, found that Germans did not blame their own government, which had been printing money excessively. Fisher wrote:

The Germans thought of commodities as rising and thought of the American gold dollar as rising. They thought we [the United States] had somehow cornered the gold of the world and were charging an outrageous price for it.

As of this writing, there is some suggestion of resurgence in the strength of labor unions, and of public support for them, in the United States. The wage-price spiral narrative does not seem poised to reappear. Inflation in the United States and other countries seems unusually tame. However, a mutation of the narrative could appear if inflation begins to creep up. The public tends to watch consumer prices closely, because of its constant repetition of purchases. The wage-price spiral narrative, or some variation on that theme, could again create a strong impulse for economic actors to try to get ahead of the inflation game. It could give them newfound zest in this effort by bringing a moral dimension into the mix, a perception of true evil in inflation, personified by certain celebrities or classes of people.


Robert J. Shiller is a Nobel Prize–winning economist, the author of the New York Times bestseller Irrational Exuberance, and the coauthor, with George A. Akerlof, of Phishing for Phools and Animal Spirits, among other books (all Princeton). He is Sterling Professor of Economics at Yale University and a regular contributor to the New York Times. He lives in New Haven, Connecticut. Twitter @RobertJShiller

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This article is part of TPM Cafe, TPM’s home for opinion and news analysis. It was published here and on the website for the Brennan Center for Justice.

It was a pretty good troll. On Friday, Elizabeth Warren’s campaign ran an ad on Facebook saying that the social media giant had endorsed President Trump. 

It hasn’t, of course — as the ad acknowledged a few sentences later. The goal, which it achieved and then some, was to draw attention to Facebook’s recent refusal to take down a Trump campaign ad that makes an objectively false claim about former Vice President Joe Biden and Ukraine, and the threat that stance poses to fair elections. Let’s see how you like having lies told publicly about you, Warren was saying to Mark Zuckerberg and company. 

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This article is part of TPM Cafe, TPM’s home for opinion and news analysis. 

The cacophony of radical right-wing violence that reverberated within the communities of Charlottesville, El Paso and Pittsburgh recently resulted in a long overdue decision by the Department of Homeland Security to treat white supremacy as a domestic terrorism threat. While DHS’ rhetorical shift is useful, it is now time for the government and private sector to counter the finances that help fuel white supremacists’ violence.

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