David and Goliath, or Why the One Percent Has to Rig the System

By Polly Cleveland

Malcolm Gladwell’s bestseller, David and Goliath, asks how and why the weak win far more often than we expect. What characteristics of the weak can sometimes make them strong? What characteristics of the powerful can often make them vulnerable? For a long-time inequality buff like me, Gladwell provides some new insights.

Gladwell tells the story of a girls’ basketball team coached by one of the fathers. The girls were small and not much good at dribbling or shooting. So the father, who had no prior experience with basketball, had his girls engage in a “full court press”, constantly running up and down the length of the court, blocking the opponents. This unorthodox behavior enabled the little girls to win again and again against better trained, taller and stronger teams – much to the resentment of their opponents. But as Gladwell points out, underdog strategies like this are very hard work.

What characterizes successful individual underdogs? A much higher than random number have overcome a traumatic childhood. For example, David Boies overcame severe dyslexia to become a prominent trial attorney. Emil Freireich, who lost both parents as a small child, bucked the medical establishment to develop effective chemotherapy for childhood leukemia.

I know personally two such underdogs: my husband Tom Haines and his daughter Avril. Tom’s father deserted when he was three; shortly afterwards the courts removed him from his mentally ill mother and placed him in an orphanage. He worked his way through high school and City College of New York as a live-in houseboy and baby-sitter. Before even completing his PhD in chemistry, he became an assistant professor at City College, and landed the College’s first NIH grant. Still in his thirties, he founded the Sophie Davis School of Medicine at City College. No conventional medical school, Sophie Davis begins European-style at the undergraduate level, to make it easier for minorities to enter medicine. When Tom’s daughter Avril was eight, her mother developed emphysema. Tom and Avril nursed her until she died when Avril was fifteen. Later, as an attorney, Avril rose rapidly in the U.S. State Department Legal Division, becoming Director of the Treaties Division, moving on to Counsel to the U.S. Senate Foreign Relations Committee, then to several top jobs for President Obama, including a year as Deputy Director of the CIA. A senior law professor at Columbia recently recommended her for the U.S. Supreme Court. She’s still only 47!

What’s with Tom and Avril? Both are supremely self-confident and optimistic, obsessively hard-working, skilled in personal relations, yet ready to buck convention. Did the trauma in their lives help make them this way?

Of course, as Gladwell points out, a rough childhood crushes more people than it empowers. However, oppression of an entire community—Gladwell gives examples of the Catholic communities in Northern Ireland during the Troubles, and the South Vietnamese peasants during the Viet Nam war—such oppression can strengthen resistance. Herein lies a major weakness of the powerful: they easily assume that the weak will give up in the face of overwhelming force. If a little force doesn’t work, just apply more.

Near-death business experiences can empower as well—as I discovered when my first husband took over his dad’s failing small health and beauty aid business. We made and marketed a variety of products, starting with Ezo Denture Cushions to stick in your false teeth and Zip Wax to peel the hair off your legs. We had $7 million annual sales and 30 employees. With my ex as CEO, I wore multiple hats: controller, purchaser, computer programmer, new product designer. It was an exhilarating nightmare: 12 hours a day, seven days a week, panic at payroll time, hours on the phone soothing vendors we had to pay late. Moving from Manhattan to a cheap old warehouse in New Jersey, and cutting back advertising, slowly we dug ourselves out.

But that’s the nature of small business: grueling hard work, over-optimism, constant crises, innovations born of desperation. And that can make small business enormously productive. Consider just one simple statistic: According to the U.S. Census, in the first quarter 2016 businesses with under $25 million in assets generated 48c in sales per dollar of assets, while those with $25 million and over generated only 13.4c, a ratio of 3.35 to one.

So what keeps us small business Davids behind fences? As Joseph Stiglitz points out in his recent book, Rewrite the Rules, over the last forty years the tax system has become much less progressive, monopolists have been given free reign, unions have been busted, the minimum wage hasn’t risen, corporate criminals have gone unpunished. Most significant, the giant banks, fattened by free money from the Federal Reserve Bank, more and more refuse to lend to small business.

So, applying Gladwell’s themes, why does the One Percent need to rig the system against the Ninety-nine Percent? Why can’t the One Percent live happily with the wealth and privilege they already enjoy? Because if they did, the more entrepreneurial members of the Ninety-nine Percent would soon do to them as David did to Goliath.

John Perkins’ New Confessions of an Economic Hit Man

By Polly Cleveland

In 1946, when I was a year old, my father hung up his Navy uniform and joined the U.S. Foreign Service. He could have returned to a well-paid position at Borden Cheese, but he wanted to continue serving his country after World War II. First we went to Bucharest Romania (’47-49), then Paris (’49-52), then Sydney Australia (’53-56), then Bangkok Thailand (’56-58), with in between stays in Washington D.C. While I was in college, my dad served as chief economic officer in Belgrade Yugoslavia (’62-65). He then worked for the State Department until his retirement in 1970; his job included speaking on college campuses to defend the war in Vietnam. If he was disillusioned, he never openly let on—though he did mutter about how anti-Communist “know-nothings” in Congress made his job harder in Yugoslavia. Years later he commented on Ronald Reagan’s 1983 invasion of Grenada (remember that, anyone?), “They must have found a couple of Communists under a bed.”

On reading John Perkins’ New Confessions of an Economic Hit Man, I kept thinking what stories my father could have told. Perkins began in 1971 as an economic consultant— “economic hit man”— with the engineering firm, MAIN, travelling to Indonesia, Panama, Colombia, Iran, Saudi Arabia and elsewhere. His job was to convince leaders to undertake wildly overambitious infrastructure projects that would enrich them and big U.S. engineering firms like Bechtel. In most cases, the projects would fail and leave nations beholden to U.S. banks or the World Bank.  Saudi Arabia was a special case; the flood of dollars from the new OPEC cartel would purchase both sophisticated infrastructure like desalinization plants and U.S. military protection against insurgents. Leaders who refused to cooperate with such plans would be picked off by CIA-supported “jackals”. Thus the overthrow of Mohammad Mosaddegh in Iran (1953); the Jacobo Árbenz coup in Guatemala (1954); the Salvador Allende coup and murder in Chile (1973); the mysterious airplane explosions that killed Jaime Roldós in Ecuador and Omar Torrijos in Panama (1981); the overthrow and murder of Maurice Bishop in Grenada (1983); the bloody invasion and capture of Manuel Noriega in Panama (1989). Somehow Fidel Castro in Cuba successfully dodged dozens of assassination attempts.

The economic hit man/ jackal strategy of debt and fear was a deliberate U.S. policy to counter influence of the Soviet Union. Perkins relates a story from a 1975 dam-building project he directed in Colombia. Guerillas confronted a Colombian engineer at the dam site, firing AK-47s into the air and at his feet, and handing him a letter. The letter read: “We, who work every day just to survive, swear on the blood of our ancestors that we will never allow dams across our rivers. We are simple Indians and mestizos, but we would rather die than stand by as our land is flooded. We warn our Colombian brothers: stop working for the construction companies.” Perkins lectured the terrified engineer; did that sound like a letter a farmer would write? He slammed his fist on the desk; did farmers with AK-47s make sense? And who invented the AK-47?

In a fit of conscience, Perkins quit MAIN in 1980. But he continued as an energy entrepreneur and consultant for another twenty years, while becoming increasingly involved in projects to help embattled natives in the Amazon. In 2005 he published Confessions of an Economic Hit Man, an immediate bestseller. In the new updated version, he focuses on how the debt-and-fear strategy is now at work all over the world, in developed as well as less-developed countries. For example, many local governments in the United States have been suckered into building public-private toll roads (see here and here and here), all of which eventually failed, sticking the governments with poorly constructed roads and piles of debt.

My father died in 2008, sharp to the end. What did he know and live with? I once asked him did he know how the CIA collaborated with drug traffickers in Thailand and Central America. “Of course!”, he said, “You can’t be choosy about your friends in a dirty business.” In retirement he called the Vietnam war a terrible mistake, but did he consider resigning when the students booed his pro-war speeches? I never thought to ask him about U.S. support for right-wing ethnic nationalists in former Yugoslavia, surely a major factor in the break-up and civil wars starting 1991.  I wonder what he would think of Venezuela today. Despite the country’s vast oil reserves, the socialist government established by Hugo Chávez seems to be collapsing, surely heading for a right-wing coup. Are the food riots and blackouts just due to mismanagement and the drop in oil prices, or have the jackals arrived to look for communists under beds?