Outlook | Review
June 22, 2018 at 7:00 AM
Moises Naim is a distinguished fellow at the Carnegie Endowment for International Peace and the author of “The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be” and “Illicit: How Smugglers, Traffickers, and Copycats Are Hijacking the Global Economy.”
Betsy DeVos, the secretary of education, practically dismantled the unit in her department charged with investigating fraud at for-profit colleges. The dozen or so lawyers and investigators who were looking at the predatory practices of some of these colleges were marginalized, reassigned or given more clerical tasks. The unit was left with only three employees, and the reorganization effectively killed investigations of the for-profit colleges suspected of misleading students about prospects for employment and salaries after graduation while burdening them with enormous debt. DeVry University is a good example of corporations with problematic behaviors. In 2016, it agreed to pay $100 million to settle a lawsuit with the Federal Trade Commission and another lawsuit with the Education Department. Recently DeVos hired one of DeVry’s former deans. His new job? Head of what’s left of the investigative unit.
Several former top employees of for-profit educational institutions that had been under investigation now have influential positions in DeVos’s Education Department. Aaron Ament, who helped create the investigative unit during the Obama administration, told the New York Times that the intention had been to protect students from fraudulent for-profit colleges. “Unfortunately, Secretary DeVos seems to think the colleges need protection from their students.”
The dismantling of oversight of for-profit colleges illustrates the main point of “Tailspin,” the latest book by journalist and entrepreneur Steven Brill. America is now divided, Brill writes, between “the protected few — the winners — who don’t need government for much and even have a stake in sabotaging the government’s responsibility to all of its citizens . . . [and] the unprotected many, who rely on government, as they always have, to protect and preserve their way of life and maybe even improve it. That divide is the essence of America’s tailspin. The protected overmatched, overran and paralyzed the government.” Brill maintains that this divide, “rather than a split between Democrats and Republicans, is the real polarization that has broken America since the 1960s: the protected versus the unprotected.”
The students who were misled by the fraudulent promises of the for-profit colleges are a perfect example of Brill’s unprotected Americans. They are left to fend for themselves by a government that seems to have decided that it is not its duty to protect consumers from the predatory tactics of private companies. In turn, these companies — or more specifically, their shareholders and leaders — now are, thanks to DeVos, protected by what Brill calls a moat, an artificial but powerful barrier that ensures that government investigations will not harm their interests or curb their privileges.
“Tailspin” is full of examples of the moats that have proliferated in America. Brill maintains that they were — and still are — built by a relatively small, entrenched class of privileged citizens who know how to game the system and prosper while leaving the unprotected behind. These elite winners did not win, writes Brill, “with the brazen corruption of the robber barons of old, but by drawing on the core values that have always defined American greatness — meritocracy, free markets, innovation in technology and finance, the rule of law, the First Amendment, even democracy itself.”
How this happened is the most interesting part of the book. While Brill is at his most unsurprising in his lengthy recounting of the well-known list of America’s maladies (inequality, the corrupting effect of money in politics, crumbling infrastructure, Wall Street’s excessive economic weight and power, dysfunctional politics, and so on) his discussion of the roots of these problems is fascinating.
He centers his analysis on the unintended consequences of some of the most attractive traits of this nation. Meritocracy is an important one, and the pages of “Tailspin” are full of examples of how it has morphed into a new aristocracy. Brill quotes Daniel Markovits, a Yale professor: “American meritocracy has thus become precisely what it was invented to combat . . . a mechanism for the dynastic transmission of wealth and privilege across generations.”
Another example of the unintended consequences at the origin of some of our current problems is the well-meaning attempt to curb the unbridled power of unelected government agencies. In 1946, Congress passed the Administrative Procedure Act, which sought to make these agencies more accountable and transparent. It also made due process an indispensable element of the government’s work. The unforeseen result was that the obligation to undertake due process in drafting legislation and regulations led to the rise of a huge and lucrative market for lawyers who could sue the government on behalf of their corporate customers, as well as for lobbyists who knew how to influence government decisions to benefit their clients.
Yet another unintended consequence emerged when defense of First Amendment free speech protections was taken to its most extreme interpretation in the 2010 Citizens United decision by the Supreme Court, which prohibited the Federal Election Commission from constraining corporate spending on political activities. Brill notes that “the Supreme Court thus extended the First Amendment in a way that opened the door for money to enter politics as never before. . . . A steady succession of cases [gave] corporations the right to speak and ultimately the right to spend hundreds of millions of dollars to influence political debate and put favored candidates into office — and even . . . block government regulations, including those aimed at protecting the sick from being targets of improper marketing of drugs that had life-threatening side effects.”
Innovations in finance, such as junk bonds, tender offers, leveraged buyouts, share buybacks, credit default swaps and other such products, also looked like great ideas at first. But Brill expertly explains how they ended up fostering a financial system that is as large, wealthy and powerful as it is rapaciously reckless, dangerously unstable and deeply regressive in terms of the distribution of income and wealth in society.
In his depiction of the undermining of democracy, Brill portrays individuals who were not well known to the public but played defining roles in creating the innovations that, in turn, allowed for the building of the moats that protected the few at the expense of the many. He zeroes in on lawyer Martin Redish, whose writings, according to Brill, set the stage for the Citizens United decision; and Joseph Flom, another lawyer, who developed the ideas of the proxy fights, tender offers and shareholder democracy that would reconfigure the private sector.
Brill also highlights the efforts of many individuals who are fighting the bad trends. Among them, he tells the story of Anthony Marx, a 44-year-old professor who in 2003 became the president of Amherst College and drastically altered its admissions and financial aid policies to diversify its student body and ensure that true meritocracy would flourish. And Bill Bradley, the legendary basketball player turned senator who, in 1996, proposed a constitutional amendment to give Congress “the power to set limits on expenditures made by, in support of, or in opposition to the nomination or election of any person to Federal office.” The college president was more successful in achieving his anti-moat goal than the senator: Bradley’s amendment did not get a Senate vote until 18 years later, when it was defeated. While each of Brill’s portraits offers an interesting and often inspiring example of dealing with a specific problem, the book fails to provide a strategic, actionable vision of what is to be done to reverse America’s alleged decline.
“Storming the moats” is its main prescription — and the title of the short last chapter. In those final words, Brill offers more a meditation on an unacceptable situation that needs urgent change than a blueprint for how to create that change. Storming the moats may be a feel-good rallying cry, but it is not enough to guide the immense societal change that will be required to counter the powerful, and often long-lasting, forces that Brill so ably discusses in the rest of the book. He offers the individuals and organizations fighting the moat-builders as the harbingers of an inevitable revolution, one in which “Americans may finally be ready to get into the same foxhole.” But what is Brill’s assessment of why this will happen and when? His answer: When Americans decide “enough is enough.”
The People and Forces Behind America's Fifty-Year Fall — and Those Fighting to Reverse It
By Steven Brill
Knopf. 441 pp. $28.95