So seldom do we motley millions all think and talk about the same thing at the same time—let alone two great big things, let alone intensely and continually for weeks at a time.
Welcome to the extraordinary fall of 2008. As the imploded financial industry is nationalized, and we prepare to elect—can it really be?—an African-American intellectual the next president, New Yorkers are in a kind of breathless, Twittery mind meld about matters of huge historic consequence. Because Wall Street is (excuse the expression) ground zero for the present cataclysm, we are probably experiencing financial vertigo more acutely than most of our fellow Americans. And yet at the same time, because something approaching nine out of ten New York voters will pull thelever for Barack Obama two weeks from now, we are at the same time brimming with uncanny, yes, hopefulness about the imminent change in national leadership and policy. Every day, crazily fibrillating numbers (the Dow down 777 points, the Dow up 936 points) make us feel sick, while another set of equally amazing numbers (Obama well ahead in every national poll, and tied or better in three southern states) puts a song in our hearts. This data-driven combination of sky-is-falling dread and OMG giddiness—meth-laced Ecstasy, anyone?—is bizarre, unprecedented. And more cognitively dissonant still, the good news is being driven in some measure by the bad news.
Exactly seven years ago, we had already become accustomed to the cliché that the previous month’s terrorist attacks had “changed everything.” As we know now, they did and they didn’t. (Irony, for instance, did not die.) Seven years from now, I’m betting, we’ll look back and reckon that this fall changed everything at least as much as the fall of 2001 did, and maybe more.
When the financial system started spectacularly and undeniably falling apart in mid-September, two weeks into the Sarah Palin Era and a week after McCain had caught and passed Obama in the polls, for a couple of days I welcomed the change of subject, the eclipse of one mind-boggling new bummer by another. I didn’t feel any jolt of Schadenfreude for the bankers whose lives had been suddenly upended—although frankly, not much pity either.
The fact that the stock market was more or less steady as she goes for another couple of weeks after that first shocking Monday allowed most of us—those of us who had never heard of credit default swaps, or earned seven-figure bonuses—to watch the disintegration of Lehman Brothers and Merrill Lynch with a certain sangfroid. It was like reading about a bloody gang war—this was the business they had chosen, no?—or watching wildfires from miles away. Given that we’d felt only glancing, tsk-tsk pity for the poor people who’d taken on unaffordable home mortgages, we weren’t about to feel real sorrow for the rich people at the top of the same collapsing pyramid, even though we personally know more of the latter than the former. Is that callous? Sure, and thus morally symmetrical, I’m-okay-Jack selfishness in reaction to others’ selfishness coming a cropper. And at first, the sense of panic and urgency among the grown-ups—the palpably terrified financial and political Establishment lunging as one toward radical, half-baked Latin Americanesque solutions—was as interesting as it was terrifying.
But then, of course, the wildfires reached the rest of us, when the stock market started plummeting three weeks ago—that is, began its series of sickeningly steep plummets punctuated by herky-jerky one- and two-day-long recoveries, each of which made the next long dive a little more dreadful and nightmarish. Those of us who own stocks—that is, most of us—are suddenly 25 percent poorer. So far.
Why are we shocked? Well, because one channel of the national discourse has been devoted for so long now to a sort of recession pregame show—is it coming? Has it started? How bad will it be?—it had become background noise. And for us New Yorkers, the big economic bad-news story of the last two years, the bursting of the housing bubble and subprime-mortgage crisis, was something happening elsewhere: Our chronic New York exceptionalism was nicely affirmed by the fact that our super-prime housing wasn’t losing value.
Of course, the special X factor inflating our real-estate bubble was all those Wall Streeters’ wealth; the $33 billion in bonuses that New York financial firms paid out last year did indeed trickle down to many of the rest of us, by making our apartments and houses remain ridiculously, uniquely valuable even as the rest of mortgaged-up Americans had become un-rich. And for those of us closer to the top of the economic heap than the bottom, the 30 percent rise in the stock market during 2006 and 2007 was like an intravenous Paxil drip that very effectively suppressed anxiety about any looming recessionary pain.
Even last month, those of us who don’t work in finance took wishful comfort in our Econ 101 understanding of the distinction between the financial crisis—that is, all the accumulated bad debt causing panicky global credit pipelines to tighten all at once, like so many sphincters—and an economic crisis, when people in general stop buying things and companies lay off workers or go out of business. The problem for New Yorkers, however, is that a financial crisis is an economic crisis, since more than a quarter of the wages in the city are paid by the stocks-and-bonds industry. For us, Wall Street is Main Street.
The other night, as I drove down one of New York’s more conventional and lovable Main Streets—Bleecker, west of Sixth—looking at the glowing shopfronts and bustling restaurants and strolling pedestrians, I had a sudden elegiac impulse to register the scene and its details. Because, I thought, once a Depression descended, these same blocks would look and feel very different; in 2010 or 2011, I might think back to this particular evening—autumn! Twilight!—and remember how sweet and jolly the city had felt and looked not so long ago.
But that’s just imaginative pessimism, the anticipation of grimness and sorrow to come. The last time the city experienced a great trauma, of course, there was no extended, queasier-and-queasier period of uncertainty and speculation: The planes hit, the Twin Towers fell, we knew who to blame. The horror was instant, physical, unequivocal. Whereas with this crisis—which does not yet have a name, another signifier of its baffling, nauseating open-endedness—nothing is manifestly different. There were no plumes, no stench, no ruins, no sudden gap in the skyline. It’s still hard to get reservations in restaurants. A fancy annual $1,000-a-plate gala I attended last week was sold out, and set a fund-raising record for the institution.
Yet as we discovered in the weeks and months after 9/11, there is some solace in the collective experience of disaster. Misery shared is preferable to misery alone, and an ebbing tide lowers all boats. It’s not just one overleveraged bank or brokerage in trouble, as it seemed at the start, but nearly all of them. Everyone who owns stock is watching their wealth shrink at more or less the same rate. And those of us who’ve fretted, passingly, about the growing extremes of economic inequality in America? That problem has been, um, addressed, by the free market: In just two months, the investor class has had its wealth reduced by $2 trillion or more. Thanks to the stock market, the rich got much richer, and now, thanks to the stock market, the rich are getting much poorer faster, in relative terms, than actually poor people.
A certain leveling is taking place. On the stoops and sidewalks of my Brooklyn neighborhood, there are lots of middle-aged men lounging all day long, comfortably pensioned-off former longshoremen and sanitation workers; I’m thinking that before long, the Upper East Side and Greenwich will acquire their analogous populations of robust, not-old guys without anything urgent to do every day.
“We need to reclaim the idea that in this country,” Obama wrote in August, “we’re all in it together.” But now the horrible economic weather has imposed the idea on us before we had the opportunity to reclaim it voluntarily, and we’re-all-in-this-together has become a powerful central trope of the Obama campaign in its final weeks.
We New Yorkers were already living in a very blue epicenter of Obama support, but during the last two weeks, his lead over McCain in this state (let alone this city) has essentially doubled, to 23 percent, a bigger margin than anywhere else in the country. It’s not only the economic horror show that’s made more and more Americans move in Obama’s direction. According to the aggregated polling numbers that have become the Dow Jones Industrial Average of presidential politics, support for McCain and Sarah Palin peaked four days after their convention. AIG had not yet gone to the Bush administration for its bailout, and Merrill and Lehman had not yet folded.
But without the financial terror—and our ultra-free-market Republican administration’s even more alarming response, which proved that there are no Milton Friedmanites in foxholes—the presidential race would surely be much closer now. Because even though the McCain-Palin surge started fizzling after September 8, Obama’s rise in the polls didn’t begin until a week after that, when the scale and severity of the financial chaos suddenly became plain. It was one thing for McCain-inclined centrists dubious about Sarah Palin to bet that she would never become president; as soon as wobbly John McCain himself was suddenly judged as a prospective reinventor of the 21st-century American political economy, the whole ticket began looking seriously iffy to everyone but hard-core Republicans. Obama passed McCain in the polls just as the $700 billion federal bailout was hatched and announced.
I know this because like so many people these last few weeks deeply invested in both equities and Obama, I’ve been toggling like a madman, compulsively and constantly, between Web-browser tabs: from the fever chart of the DJIA on Google Finance over to the national polling page on Real Clear Politics, then back to the Dow, then to FiveThirtyEight for analysis of the new tranche of polling data, back to the Dow, then the electoral-vote map at Pollster, back to the Dow, Real Clear Politics again for the latest state polls, and so on, dozens of times a day. The psychological result, of course, has been a high-frequency bipolarity—thrilled, depressed, thrilled, depressed—powered by Google.
The steadiness of Obama’s momentum has reflected (not coincidentally, I think) the soothing, absolutely even-keeled steadiness of his public manner since the crisis began. He’s come across like the person in the stuck elevator or subway car to whom all the freaked-out passengers instinctively grant authority. And for those of us obsessing over every tick in the financial and political metrics, it’s additionally reassuring to watch at least one of the graph lines moving in a continuously positive direction.
I do leave the computer screen sometimes and get out of the house. Back on the first of the month (the Dow still up almost at 11,000, Obama already five points ahead of McCain), I had dinner in the Village with a friend of mine who lives in the South. He’s middle-aged, wears a suit and tie, and probably voted in the past for a Republican presidential candidate or two. He told me, amazement in his voice, that two different South Carolina pals of his—well-to-do Republican white men his age—had confessed to him they were planning to vote for Obama: one because Palin was a deal breaker, the other because he thought that electing a black guy president would once and for all absolve white America of its historical racial crimes. And so when the conservative pundits started mutinying—Kathleen Parker, who has implied she’ll vote for Obama because of Palin, and William F. Buckley’s son Chris, who endorsed Obama last week—it didn’t shock me.
Happy days are … no; I am not by nature pessimistic, exactly, but I do deny myself over-optimism about particular outcomes. (The behavior of the market last week—superfantastic Monday, two straight dreary days after—only affirmed my resistance to sunshiny extrapolations.) When it comes to the election, I’ve been seeking out buzz-kills—George Packer’s New Yorker piece about rural Ohioans’ racism was a good cold shower, as was a Google search for Obama and nigger.
I’ve been saying for years and years that the eighties never really ended culturally and politically—not the way the fifties and sixties and seventies did. But 2008 will surely turn out to be the conclusion of an era. Reaganism—the utter devotion to deregulation and hypercapitalism, the unbending antipathy to the federal government, American power as nothing but cheerful bullying—is over. We all enjoyed playing cowboy until too many of us fell off our horses or got shot. The most fundamental form of American exceptionalism—that is, among all developed countries, our peculiar predisposition to magical thinking about human perfectibility and business schemes and supernatural salvation—won’t disappear overnight. But in our economics and politics sane people understand that we’ve reached that Wile E. Coyote running-in-midair moment where reality kicks in and he falls to the bottom of the cliff. Gravity (like evolution, and man-made climate change) exists.
We are, maybe, becoming a more reality-based nation again. We can no longer get by on tautological self-love, believing we’re smart simply because we’re New Yorkers, or virtuous because we’re Americans. The debacle caused by our reckless, party-hearty overleveraging of the economy should make us realize that we have met the enemy, and he is us. And then, if we’re lucky, we’ll redeem ourselves by fixing the huge messes we’ve made, and thereby discovering that we really are the ones we’ve been waiting for.
• Up-to-the-Minute Market Reactions
• The Fall of the I-Banker
• The Trickle-Down of Misfortune
• Stages of Economic Calamity