What cultural conflicts emerged in the 1990s

What cultural conflicts emerged in the 1990s?

F O C U S Q U E S T I O N S What were the major international initiatives of the Clinton administration in the aftermath of the Cold War?

What forces drove the economic resurgence of the 1990s?

What cultural conflicts emerged in the 1990s?

How did a divisive political partisanship affect the election of 2000?

Why did Al Qaeda attack the United States on September 11, 2001?

F R O M T R I U M P H T O T R A G E D Y

★ C H A P T E R 2 7 ★

1 9 8 9 – 2 0 0 1

The year 1989 was one of the most momentous of the twentieth century. In April, tens of thousands of student demonstrators occupied Tianan-men Square in the heart of Beijing, demanding greater democracy in China. Workers, teachers, and even some government officials joined them, until their numbers swelled to nearly 1 million. Both the reforms Mikhail Gorbachev had introduced in the Soviet Union and the example of American institutions inspired the protesters. The students erected a figure reminiscent of the Statue of Liberty, calling it “The Goddess of Democracy and Freedom.” In June, Chinese troops crushed the protest, killing an unknown number of people, possibly thousands.

In the fall of 1989, pro- democracy demonstrations spread across eastern Europe. Gorbachev made it clear that unlike in the past, the Soviet Union

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would not intervene. The climactic event took place on November 9 when crowds breached the Berlin Wall, which since 1961 had stood as the Cold War’s most prominent symbol. One by one, the region’s communist govern- ments agreed to give up power. In 1990, a reunified German nation absorbed East Germany. The remarkably swift and almost entirely peaceful collapse of communism in eastern Europe became known as the “velvet revolution.”

Meanwhile, the Soviet Union itself slipped deeper and deeper into crisis. Gorbachev’s attempts at economic reform produced only chaos, and his policy of political openness allowed long- suppressed national and eth- nic tensions to rise to the surface. In August 1991, a group of military lead- ers attempted to seize power to over- turn the government’s plan to give greater autonomy to the various parts of the Soviet Union. Russian president Boris Yeltsin mobilized crowds in Mos- cow that restored Gorbachev to office. Gorbachev then resigned from the Communist Party, ending its eighty-

four- year rule. One after another, the republics of the Soviet Union declared themselves sovereign states. At the end of 1991, the Soviet Union ceased to exist; in its place were fifteen new independent nations.

The sudden and unexpected collapse of communism marked the end of the Cold War and a stunning triumph for the United States and its allies. For the first time since 1917, there existed a truly worldwide capitalist system. Even China, while remaining under Communist Party rule, had already embarked on market reforms and rushed to attract foreign investment. Other events sug- gested that the 1990s would also be a “decade of democracy.” In 1990, South Africa released Nelson Mandela, head of the African National Congress, from prison. Four years later, as a result of the first democratic elections in the coun- try’s history, Mandela became president, ending the system of state- sponsored racial inequality, known as “apartheid,” and white minority government.

The Goddess of Democracy and Freedom, a statue reminiscent of the Statue of Liberty, was displayed by pro- democracy advocates during the 1989 demonstrations in Beijing’s Tiananmen Square. After allowing it to continue for two months, the Chinese government sent troops to crush the peaceful occupation of the square.

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Throughout Latin America and Africa, civil- ian governments replaced military rule.

The sudden shift from a bipolar world to one of unquestioned American predominance promised to redefine the country’s global role. President George H. W. Bush spoke of the com- ing of a new world order. But no one knew what its characteristics would be and what new challenges to American power might arise.

T H E P O S T– C O L D W A R W O R L D A New World Order?

Bush’s first major foreign policy action was a throwback to the days of American interven- tionism in the Western Hemisphere. At the end of 1989, he dispatched troops to Panama to overthrow the government of General Manuel Antonio Noriega, a former ally of the United States who had become involved in the international drug trade. The United States installed a new government and flew Noriega to Florida, where he was tried and convicted on drug charges.

The Gulf War

A far more serious crisis arose in 1990 when Iraq invaded and annexed Kuwait, an oil- rich sheikdom on the Persian Gulf. Fearing that Iraqi dictator Saddam Hussein might next attack Saudi Arabia, a longtime ally that supplied more oil to the United States than any other country, Bush rushed troops to defend Kuwait and warned Iraq to with- draw from the country or face war. His policy aroused intense debate in the United States. But the Iraqi invasion so flagrantly violated

1989 Communism falls in eastern Europe

U.S.-led Panamanian coup

1990 Americans with Disabilities Act

Germany reunifies

1991 Gulf War

Dissolution of the Soviet Union

1992 Los Angeles riots

Casey v. Planned Parent- hood of Pennsylvania

Clinton elected president

1993 Israel and Palestine Liber- ation Organization sign the Oslo Accords

North American Free Trade Agreement approved

1994 Republicans win Congress; Contract with America

Rwandan genocide

1995 Oklahoma City federal building bombed

1996 Clinton eliminates Aid to Families with Dependent Children

Defense of Marriage Act

1998– Clinton impeachment 1989 proceedings

Kosovo War

1999 Protests in Seattle against the World Trade Organization

Glass- Steagall Act repealed

2000 Bush v. Gore

2001 9/11 attacks

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1074 ★ CHAPTER 27 From Triumph to Tragedy

international law that Bush succeeded in building a forty- nation coalition com- mitted to restoring Kuwait’s independence, secured the support of the United Nations, and sent half a million American troops along with a naval armada to the region.

In February 1991, the United States launched Operation Desert Storm, which quickly drove the Iraqi army from Kuwait. Tens of thousands of Iraqis and 184 Americans died in the conflict. The United Nations ordered Iraq to disarm and imposed economic sanctions that produced widespread civilian suffering for the rest of the decade. But Hussein remained in place. So did a large American military establishment in Saudi Arabia, to the outrage of Islamic fundamental- ists who deemed its presence an affront to their faith.

The Gulf War was the first post– Cold War international crisis. Relying on high- tech weaponry like cruise missiles that reached Iraq from bases and aircraft carriers hundreds of miles away, the United States was able to prevail quickly and avoid the prolonged involvement and high casualties of Vietnam. The Soviet Union, in the process of disintegration, remained on the sidelines. In the war’s immediate aftermath, Bush’s public approval rating rose to an unprecedented 89 percent.

Visions of America’s Role

In a speech to Congress, President Bush identified the Gulf War as the first step in the struggle to create a world rooted in democracy and global free trade. But it remained unclear how this broad vision would be translated into policy. Soon after the end of the war, General Colin Powell, chairman of the Joint Chiefs of Staff, and Dick Cheney, the secretary of defense, outlined different visions of the future. Powell predicted that the post– Cold War world would be a dangerous environment with conflicts popping up in unexpected places. To avoid being drawn into an unending role as global policeman, he insisted, the United States should not commit its troops abroad without clear objectives and a timetable for withdrawal. Cheney argued that with the demise of the Soviet Union, the United States possessed the power to reshape the world and prevent hostile states from achieving regional power. It must be willing to use force, independently if necessary, to maintain its strategic dominance. For the rest of the 1990s, it was not certain which definition of the American role in the post– Cold War world would predominate.

The Election of Clinton

Had a presidential election been held in 1991, Bush would undoubtedly have been victorious. But in that year the economy slipped into recession. Despite

THE POST– COLD WAR WORLD ★ 1075

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MONTENEGRO SERBIA

ALBANIA MACEDONIA

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ROMANIA

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E A S T E R N E U R O P E A F T E R T H E C O L D WA R

The end of the Cold War and breakup of the Soviet Union, Czechoslovakia, and Yugoslavia redrew the map of eastern Europe (compare this map with the map of Cold War Europe in Chapter 23). Two additional nations that emerged from the Soviet Union lie to the east and are not indicated here: Kyrgyzstan and Tajikistan.

victory in the Cold War and the Gulf, more and more Americans believed the country was on the wrong track. No one seized more effectively on the widespread sense of unease than Bill Clinton, a former governor of Arkansas. In 1992, Clinton won the Democratic nomination by combining social liberal- ism (he supported abortion rights, gay rights, and affirmative action for racial

What were the major international initiatives of the Clinton administration in the aftermath of the Cold War?

1076 ★ CHAPTER 27 From Triumph to Tragedy

minorities) with elements of conservatism (he pledged to reduce government bureaucracy and, borrowing a page from Republicans, promised to “end wel- fare as we know it”). A charismatic campaigner, Clinton conveyed sincere con- cern for voters’ economic anxieties.

Bush, by contrast, seemed out of touch with the day- to- day lives of ordi- nary Americans. On the wall of Democratic headquarters, Clinton’s campaign director posted the slogan, “It’s the Economy, Stupid”—a reminder that the eco- nomic downturn was the Democrats’ strongest card. Bush was further weak- ened when conservative leader Pat Buchanan delivered a fiery televised speech at the Republican national convention that declared cultural war against gays, feminists, and supporters of abortion rights. This seemed to confirm the Demo- cratic portrait of Republicans as intolerant and divisive.

A third candidate, the eccentric Texas billionaire Ross Perot, also entered the fray. He attacked Bush and Clinton as lacking the economic know- how to deal with the recession and the ever- increasing national debt. That millions of Americans considered Perot a credible candidate— at one point, polls showed him leading both Clinton and Bush— testified to widespread dissatisfaction with the major parties. Perot’s support faded as election day approached, but he still received 19 percent of the popular vote, the best result for a third- party candidate since Theodore Roosevelt in 1912. Clinton won by a substan- tial margin, a humiliating outcome for Bush, given his earlier popularity.

Clinton in Office

In his first two years in office, Clinton turned away from some of the social and economic policies of the Reagan and Bush years. He appointed several blacks and women to his cabinet, including Janet Reno, the first female attorney gen- eral, and named two supporters of abortion rights, Ruth Bader Ginsburg and Stephen Breyer, to the Supreme Court. He modified the military’s strict ban on gay soldiers, instituting a “Don’t ask, don’t tell” policy by which officers would not seek out gays for dismissal from the armed forces. His first budget raised taxes on the wealthy and significantly expanded the Earned Income Tax Credit (EITC)—a cash payment for low- income workers begun during the Ford administration. The most effective antipoverty policy since the Great Society, the EITC raised more than 4 million Americans, half of them children, above the poverty line during Clinton’s presidency.

Clinton shared his predecessor’s passion for free trade. Despite strong oppo- sition from unions and environmentalists, he obtained congressional approval in 1993 of the North American Free Trade Agreement (NAFTA), a treaty nego- tiated by Bush that created a free- trade zone consisting of Canada, Mexico, and the United States.

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The major policy initiative of Clinton’s first term was a plan devised by a panel headed by his wife, Hillary, a lawyer who had pursued an indepen- dent career after their marriage, to address the rising cost of health care and the increasing number of Americans who lacked health insurance. In Can- ada and western Europe, governments provided universal medical coverage. The United States had the world’s most advanced medical technology and a woefully incomplete system of health insurance. The Great Society had pro- vided coverage for the elderly and poor through the Medicare and Medicaid programs. Many employers offered health insurance to their workers. But tens of millions of Americans lacked any coverage at all.

Announced with great fanfare by Hillary Rodham Clinton at congressio- nal hearings in 1993, Clinton’s plan would have provided universal cover- age through large groupings of medical care businesses. Doctors and health insurance and drug companies attacked it vehemently, fearing government regulations that would limit reimbursement for medical procedures and the price of drugs. Too complex to be easily understood by most voters, and vulner- able to criticism for further expanding the unpopular federal bureaucracy, the plan died in 1994.

The “Freedom Revolution”

With the economy recovering slowly from the recession and Clinton’s first two years in office seemingly lacking in significant accomplishments, voters in 1994 turned against the administration. For the first time since the 1950s, Republicans won control of both houses of Congress. They proclaimed their tri- umph the “Freedom Revolution.” Newt Gingrich, a conservative congressman from Georgia who became the new Speaker of the House, masterminded their campaign. Gingrich had devised a platform called the Contract with America, which promised to curtail the scope of government, cut back on taxes and eco- nomic and environmental regulations, overhaul the welfare system, and end affirmative action.

Viewing their electoral triumph as an endorsement of the contract, Repub- licans moved swiftly to implement its provisions. The House approved deep cuts in social, educational, and environmental programs, including the popular Medicare system. With the president and Congress unable to reach agreement on a budget, the government in December 1995 shut down all nonessential operations, including Washington, D.C., museums and national parks.

Gingrich had assumed that the public shared his intense ideological con- victions. He discovered that in 1994 they had voted against Clinton, not for the full implementation of the Contract with America. Most Americans blamed Congress for the impasse, and Congress soon retreated.

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Clinton’s Political Strategy

Like Truman after the Republican sweep of 1946, Clinton rebuilt his popularity by campaigning against a radical Congress. He opposed the most extreme parts of his opponents’ program, while adopting others. In his state of the union address of January 1996, he announced that “the era of big government is over,” in effect turning his back on the tradition of Democratic Party liberalism and embracing the antigovernment outlook associated with Republicans since the days of Barry Goldwater.

In 1996, ignoring the protests of most Democrats, Clinton signed into law a Republican bill that abolished the program of Aid to Families with Depen- dent Children (AFDC), commonly known as “welfare.” Grants of money to the states, with strict limits on how long recipients could receive payments, replaced it. At the time of its abolition, AFDC assisted 14 million individuals, 9 million of them children. Thanks to stringent new eligibility requirements imposed by the states and the economic boom of the late 1990s, welfare rolls plummeted. But the number of children living in poverty remained essentially unchanged. Nonetheless, Clinton had succeeded in one of his primary goals: by the late 1990s, welfare, a hotly contested issue for twenty years or more, had disappeared from political debate.

Commentators called Clinton’s political strategy “triangulation.” This meant embracing the most popular Republican policies, like welfare reform, while leaving his opponents with extreme positions unpopular among middle- class voters, such as hostility to abortion rights and environmental protection. Clinton’s strategy enabled him to neutralize Republican claims that Democrats were the party of high taxes and lavish spending on persons who preferred dependency to honest labor. Clinton’s passion for free trade alienated many working- class Democrats but convinced much of the middle class that the party was not beholden to the unions.

Clinton easily defeated Republican Bob Dole in the presidential contest of 1996, becoming the first Democrat elected to two terms since FDR. Clinton had accomplished for Reaganism what Eisenhower had done for the New Deal, and Nixon for the Great Society— consolidating a basic shift in American politics by accepting many of the premises of his opponents.

Clinton and World Affairs

Like Jimmy Carter before him, Clinton’s primary political interests concerned domestic, not international, affairs. But with the United States now indisput- ably the world’s dominant power, Clinton, like Carter, took steps to encour- age the settlement of long- standing international conflicts and tried to elevate

THE POST– COLD WAR WORLD ★ 1079

support for human rights to a central place in international relations. He achieved only mixed success.

Clinton strongly supported a 1993 agreement, negotiated at Oslo, Norway, in which Israel for the first time recognized the legitimacy of the Palestine Lib- eration Organization. The Oslo Accords seemed to outline a road to Mideast peace. But neither side proved willing to implement them fully. Israeli govern- ments continued to build Jewish settlements on Palestinian land in the West Bank— a part of Jordan that Israel had occupied during the 1967 Six- Day War. The new Palestinian Authority, which shared in governing parts of the West Bank as a stepping- stone to full statehood, proved to be corrupt, powerless, and unable to curb the growth of groups bent on violence against Israel. At the end of his presidency, Clinton brought Israeli and Palestinian leaders to Camp David to try to work out a final peace treaty. But the meeting failed, and vio- lence soon resumed.

Like Carter, Clinton found it difficult to balance concern for human rights with strategic and economic interests and to formulate clear guidelines for humanitarian interventions overseas. For example, the United States did noth- ing in 1994 when tribal massacres racked Rwanda, in central Africa. More than 800,000 people were slaughtered in the Rwandan genocide, and 2 million ref- ugees fled the country.

The Balkan Crisis

The most complex foreign policy crisis of the Clinton years arose from the dis- integration of Yugoslavia, a multiethnic state in southeastern Europe that had been carved from the old Austro- Hungarian empire after World War I. As in the rest of eastern Europe, the communist government that had ruled Yugo- slavia since the 1940s collapsed in 1989. Within a few years, the country’s six provinces dissolved into five new states. Ethnic conflict plagued several of these new nations. Ethnic cleansing— a terrible new term meaning the forcible expulsion from an area of a particular ethnic group— now entered the inter- national vocabulary. By the end of 1993, more than 100,000 Bosnians, nearly all of them civilians, had perished in the Balkan crisis.

With the Cold War over, protec- tion of human rights in the Balkans gave NATO a new purpose. After

What were the major international initiatives of the Clinton administration in the aftermath of the Cold War?

Serbian refugees fleeing a Croat offensive during the 1990s. By the fall of 1995, the wars that followed the breakup of Yugoslavia and accom- panying “ethnic cleansing” had displaced over 3 million people.

1080 ★ CHAPTER 27 From Triumph to Tragedy

considerable indecision, NATO launched air strikes against Bosnian Serb forces, with American planes contributing. UN troops, including 20,000 Americans, arrived as peacekeepers. In 1998, ethnic cleansing again surfaced, this time by Yugoslavian troops and local Serbs against the Albanian population of Kosovo, a province of Serbia. More than 800,000 Albanians fled the region. To halt the bloodshed, NATO launched a two- month war in 1999 against Yugoslavia that led to the deployment of American and UN forces in Kosovo.

Human Rights

During Clinton’s presidency, human rights played an increasingly important role in international affairs. Hundreds of nongovernmental agencies through- out the world defined themselves as protectors of human rights. During the 1990s, the agenda of international human rights organizations expanded to include access to health care, women’s rights, and the rights of indigenous peoples like the Aborigines of Australia and the descendants of the original inhabitants of the Americas. Human rights emerged as a justification for inter- ventions in matters once considered to be the internal affairs of sovereign nations. The United States dispatched the military to distant parts of the world to assist in international missions to protect civilians.

New institutions emerged that sought to punish violations of human rights. The Rwandan genocide produced a UN- sponsored war crimes court that sentenced the country’s former prime minister to life in prison. An interna- tional tribunal put Yugoslav president Slobodan Miloševič on trial for sponsor- ing the massacre of civilians. It remained to be seen whether these initiatives would grow into an effective international system of protecting human rights across national boundaries. Despite adopting human rights as a slogan, many governments continued to violate them in practice.

G L O B A L I Z A T I O N A N D I T S D I S C O N T E N T S In December 1999, delegates from around the world gathered in Seattle for a meeting of the World Trade Organization (WTO), a 135-nation group created five years earlier to reduce barriers to international commerce and settle trade disputes. To the astonishment of residents of the city, more than 30,000 persons gathered to protest the meeting. Their marches and rallies brought together factory workers, who claimed that global free trade encouraged corporations to shift production to low- wage centers overseas, and “ tree- huggers,” as some reporters called environmentalists, who complained about the impact on the earth’s ecology of unregulated economic development.

Some of the latter dressed in costumes representing endangered species— monarch butterflies whose habitats were disappearing because of the widespread

GLOBALIZATION AND ITS DISCONTENTS ★ 1081

destruction of forests by lumber companies, and sea turtles threatened by unrestricted ocean fishing. Protesters drew attention to the depletion of ozone in the atmosphere, which shields the earth from harmful solar radiation. The heightened use of aerosol sprays and refrigerants containing damaging chem- icals had caused a large hole in the ozone layer. A handful of self- proclaimed anarchists embarked on a window- breaking spree at local stores. The police sealed off the downtown and made hundreds of arrests, and the WTO gather- ing disbanded.

Once a center of labor radicalism, the Seattle area in 1999 was best known as the home of Microsoft, developer of the Windows operating system used in most of the world’s computers. The company’s worldwide reach symbolized globalization, the process by which people, investment, goods, information, and culture increasingly flowed across national boundaries. Globalization has been called “the concept of the 1990s.” During that decade, the media resounded with announcements that a new era in human history had opened, with a borderless economy and a “global civilization” that would soon replace traditional cultures.

Globalization, of course, was hardly a new phenomenon. The internation- alization of commerce and culture and the reshuffling of the world’s peoples had been going on since the explorations of the fifteenth century. But the scale and scope of late- twentieth- century globalization was unprecedented. Thanks to satellites and the Internet, information and popular culture flowed instanta- neously to every corner of the world. Manufacturers and financial institutions scoured the world for profitable investment opportunities.

Perhaps most important, the collapse of communism between 1989 and 1991 opened the entire world to the spread of market capitalism and to the idea that government should interfere as little as possible with economic activity. Amer- ican politicians and social commentators increasingly criticized the regulation of wages and working conditions, assistance to the less fortunate, and environ- mental protections as burdens on international competitiveness. During the 1990s, presidents Bush, a Republican, and Clinton, a Democrat, both spoke of an American mission to create a single global free market as the path to rising living standards, the spread of democracy, and greater worldwide freedom.

The media called the loose coalition of groups who organized the Seattle protests the “antiglobalization” movement. In fact, they challenged not glo- balization itself but its social consequences. Globalization, the demonstra- tors claimed, accelerated the worldwide creation of wealth but widened gaps between rich and poor countries and between haves and have- nots within societies. Decisions affecting the day- to- day lives of millions of people were made by institutions— the World Trade Organization, International Monetary Fund, World Bank, and multinational corporations— that operated without any democratic input. Demonstrators demanded not an end to global trade and capital flows, but the establishment of international standards for wages,

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labor conditions, and the environment, and greater investment in health and education in poor countries. The Battle of Seattle placed on the national and international agendas a question that promises to be among the most pressing concerns of the twenty- first century— the relationship between globalization, economic justice, and freedom.

The economy’s performance in the 1990s at first seemed to justify the claims of globalization’s advocates. After recovery from the recession of 1990–1991, economic expansion continued for the rest of the decade. By 2000, unemployment stood below 4 percent, a figure not seen since the 1960s. The boom became the longest uninterrupted period of economic expansion in the nation’s history. Because Reagan and Bush had left behind massive budget defi- cits, Clinton worked hard to balance the federal budget— a goal traditionally associated with fiscal conservatives. Since economic growth produced rising tax revenues, Clinton during his second term not only balanced the budget but actually produced budget surpluses.

The Computer Revolution

Many commentators spoke of the 1990s as the dawn of a “new economy,” in which computers and the Internet would produce vast new efficiencies and the production and sale of information would occupy the central place once held by the manufacture of goods. Computers had first been developed during and after World War II to solve scientific problems and do calculations involving enormous amounts of data. The early ones were extremely large, expensive, and, by modern standards, slow. Research for the space program of the 1960s spurred the development of improved computer technology, notably the min- iaturization of parts thanks to the development of the microchip on which cir- cuits could be imprinted.

Microchips made possible the development of entirely new consumer prod- ucts. Videocassette recorders, handheld video games, cellular phones, and dig- ital cameras were mass- produced at affordable prices during the 1990s, mostly in Asia and Latin America rather than the United States. But it was the com- puter that transformed American life. Beginning in the 1980s, companies like Apple and IBM marketed computers for business and home use. As computers became smaller, faster, and less expensive, they found a place in businesses of every kind. In occupations as diverse as clerical work, banking, architectural design, medical diagnosis, and even factory production, they transformed the American workplace. They also changed private life. By the year 2000, nearly half of all American households owned a personal computer, used for enter- tainment, shopping, and sending and receiving electronic mail. Centers of com- puter technology, such as Silicon Valley south of San Francisco, the Seattle and Austin metropolitan areas, and lower Manhattan, boomed during the 1990s.

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The Internet, first developed as a high- speed military communications network, was simplified and opened to commercial and individual use through personal computers. The Internet expanded the flow of information and com- munications more radically than any invention since the printing press. At a time when the ownership of newspapers, television stations, and publishing houses was becoming concentrated in the hands of a few giant media con- glomerates, the fact that anyone with a computer could post his or her ideas for worldwide circulation led “netizens” (“citizens” of the Internet) to hail the advent of a new, democratic public sphere in cyberspace.

The Stock Market Boom and Bust

Economic growth and talk of a new economy sparked a frenzied boom in the stock market that was reminiscent of the 1920s. Investors, large and small, poured funds into stocks, spurred by the rise of discount and online firms that advertised aggressively and charged lower fees than traditional brokers. By 2000, a majority of American households owned stocks directly or through investment in mutual funds and pension and retirement accounts.

Investors were especially attracted to the new “dot coms”—companies that conducted business via the Internet and seemed to symbolize the promise of

Two architects of the computer revolution, Steve Jobs (on the left), the head of Apple Com- puter, and Bill Gates, founder of Microsoft, which makes the operating system used in most of the world’s computers.

What forces drove the economic resurgence of the 1990s?

1084 ★ CHAPTER 27 From Triumph to Tragedy

the new economy. The NASDAQ, a stock exchange dominated by new technol- ogy companies, rose more than 500 percent from 1998 to 1999. Many of these “ high- tech” companies never turned a profit. But economic journalists and stock brokers explained that the new economy had so revolutionized business that traditional methods of assessing a company’s value no longer applied.

Inevitably, the bubble burst. On April 14, 2000, stocks suffered their larg- est one- day point drop in history. For the first time since the Depression, stock prices declined for three successive years (2000–2002), wiping out billions of dollars in Americans’ net worth and pension funds. The value of NASDAQ stocks fell by nearly 80 percent between 2000 and 2002. By 2001, the American economy had fallen into a recession. Talk of a new economy, it appeared, had been premature.

The Enron Syndrome

Only after the market dropped did it become apparent that the stock boom of the 1990s had been fueled in part by fraud. For a time in 2001 and 2002, Ameri- cans were treated almost daily to revelations of incredible greed and corruption on the part of respected brokerage firms, accountants, and company executives. During the late 1990s, accounting firms like Arthur Andersen, giant banks like JPMorgan Chase and Citigroup, and corporate lawyers pocketed extravagant fees for devising complex schemes to help push up companies’ stock prices by hiding their true financial condition. Enron, a Houston- based energy company that epitomized the new economy— it bought and sold electricity rather than actually producing it— reported as profits billions of dollars in operating losses.

In the early twenty- first century, the bill came due for many corporate criminals. The founder of Adelphia Communications was convicted of misuse of company funds. A jury found the chairman of Tyco International guilty of looting the company of millions of dollars. A number of former chief execu- tives faced long prison terms. Kenneth Lay and Jeffrey Skilling, chief officers of Enron, were convicted by a Texas jury of multiple counts of fraud.

Fruits of Deregulation

At the height of the 1990s boom, with globalization in full swing, stocks ris- ing, and the economy expanding, the economic model of free trade and dereg- ulation appeared unassailable. But the retreat from government economic regulation, a policy embraced by both the Republican Congress and President Clinton, left no one to represent the public interest.

The sectors of the economy most affected by the scandals— energy, telecom- munications, and stock trading— had all been subjects of deregulation. Enron could manipulate energy prices because Congress had granted it an exemption from laws regulating the price of natural gas and electricity.

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Many stock frauds stemmed from the repeal in 1999 of the Glass- Steagall Act, a New Deal measure that separated commercial banks, which accept depos- its and make loans, from investment banks, which invest in stocks and real estate and take larger risks. The repeal made possible the emergence of “super- banks” that combined these two functions. Phil Gramm, the Texas congress- man who wrote the repeal bill, which Clinton signed, explained his thinking in this way: “ Glass- Steagall came at a time when the thinking was that govern- ment was the answer. In this era of economic prosperity, we have decided that freedom is the answer.”

But banks took their new freedom as an invitation to engage in all sorts of misdeeds, knowing that they had become so big that if anything happened, the federal government would have no choice but to rescue them. Banks poured money into risky mortgages. When the housing bubble collapsed in 2007–2008, the banks suffered losses that threatened to bring down the entire financial system. The Bush and Obama administrations felt they had no choice but to expend hundreds of billions of dollars of taxpayer money to save the banks from their own misconduct.

Rising Inequality

The boom that began in 1995 benefited nearly all Americans. For the first time since the early 1970s, average real wages and family incomes began to grow sig- nificantly. Economic expansion at a time of low unemployment brought rapid increases in wages for families at all income levels. It aided low- skilled work- ers, especially non- whites, who had been left out of previous periods of growth. Yet, despite these gains, in the last two decades of the twentieth century, the poor and the middle class became worse off while the rich became significantly richer. The wealth of the richest Americans exploded during the 1990s. Sales of luxury goods like yachts and mansions boomed. Bill Gates, head of Microsoft and the country’s richest person, owned as much wealth as the bottom 40 per- cent of the American population put together.

Dot- com millionaires and well- paid computer designers and programmers received much publicity. But companies continued to shift manufacturing jobs overseas. Thanks to NAFTA, a thriving industrial zone emerged just across the southern border of the United States, where American manufacturers built plants to take advantage of cheap labor and weak environmental and safety regulations. Business, moreover, increasingly relied for profits on financial operations rather than making things. The financial sector of the economy accounted for around 10 percent of total profits in 1950; by 2000 the figure was up to 40 percent. Com- panies like Ford and General Electric made more money from interest on loans to customers and other financial operations than from selling their products.

What forces drove the economic resurgence of the 1990s?

1086 ★ CHAPTER 27 From Triumph to Tragedy

The outsourcing of jobs soon moved from manufacturing to other areas, including accounting, legal services, banking, and other skilled jobs where companies could employ workers overseas for a fraction of their cost in the United States. All this lowered prices for consumers, but also threw millions of American workers into competition with those around the globe, producing a relentless downward pressure on American wages.

Overall, between 1990 and 2008, companies that did business in global markets contributed almost nothing to job growth in the United States. Microsoft, symbol of the new economy, employed only 30,000 people. Apple, another highly success- ful company, whose computers, iPads, and iPhones were among the most ubiqui- tous consumer products of the early twenty- first century, in 2010 employed some 43,000 persons in the United States (the large majority a low- wage sales force in the company’s stores). Its contractors, who made these products, had more than 700,000 employees, almost all of them overseas. In 1970, General Motors had been the country’s largest corporate employer. In the early twenty- first century, it had been replaced by Wal- Mart, a giant discount retail chain that paid most of its 1.6 million workers slightly more than the minimum wage. Wal- Mart aggressively opposed efforts at collective bargaining. Not a single one of its employees belonged to a union. Thanks to NAFTA, which enabled American companies to expand their business in Mexico, by 2010 Wal- Mart was also the largest employer in that country.

C U L T U R E W A R S The end of the Cold War ushered in hopes for a new era of global harmony. Instead, what one observer called a “rebellion of particularisms”—renewed emphasis on group identity and insistent demands for group recognition and power— has racked the international arena. In the nineteenth and twen- tieth centuries, socialism and nationalism had united people of different backgrounds in pursuit of common goals. Now, in Africa, Asia, the Middle East, and parts of Europe, the waning of movements based on socialism and the declining power of nation- states arising from globalization seemed to unleash long- simmering ethnic and religious antagonisms. Partly in reac- tion to the global spread of a secular culture based on consumption and mass entertainment, intense religious movements attracted increasing numbers of followers— Hindu nationalism in India, orthodox Judaism in Israel, Islamic fundamentalism in much of the Muslim world, and evangelical Christianity in the United States. Like other nations, although in a far less extreme way and with little accompanying violence, the United States has experienced divisions arising from the intensification of ethnic and racial identities and religious fundamentalism.

CULTURE WARS ★ 1087

The Newest Immigrants

Because of shifts in immigration, cul- tural and racial diversity have become increasingly visible in the United States. Until the immigration law of 1965, the vast majority of twentieth- century newcomers hailed from Europe. That measure, as noted in Chapter 25, sparked a wholesale shift in immigrants’ origins. Between 1965 and 2010, nearly 38 million immi- grants entered the United States, a number larger than the 27 million during the peak period of immigra- tion between 1880 and 1924. About 50 percent came from Latin America and the Caribbean, 35 percent from Asia, and smaller numbers from the Middle East and Africa. Only 10 per- cent arrived from Europe, mostly from the war- torn Balkans and the former Soviet Union.

In 2010, the number of foreign- born persons living in the United States stood at more than 40 million, or 13 percent of the population. Although less than the peak proportion of 14 percent in 1910, in absolute numbers this repre- sented the largest immigrant total in the nation’s history. The immigrant influx changed the country’s religious and racial map. By 2010, more than 4 million Muslims resided in the United States, and the combined population of Bud- dhists and Hindus exceeded 1 million.

As in the past, many immigrants became urban residents, with New York City, Los Angeles, Chicago, and Miami the most common destinations. New eth- nic communities emerged, with homes, shops, restaurants, foreign- language newspapers, radio and television stations, and ethnic professionals like busi- nessmen and lawyers. Unlike in the past, rather than being concentrated in one or two parts of city centers, immigrants quickly moved into outlying neigh- borhoods and older suburbs. The immigrant influx revitalized neighborhoods like New York City’s Washington Heights (a Dominican enclave) and Flush- ing (a center for Asian newcomers). By the turn of the century, more than half of all Latinos lived in suburbs. Orange County, California, which had been a stronghold of suburban conservatism between 1960 and 1990, elected a Latina Democrat to Congress in the late 1990s. While most immigrants settled on the East and West Coasts, some moved to other parts of the country. They brought

Erected on U.S. 5, an interstate highway running from the Mexican to Canadian borders along the Pacific Coast, this sign warns motorists to be on the lookout for people (i.e., undocumented immigrant families) crossing the road on foot. The sign’s placement north of San Diego, about thirty miles north of Mexico, illustrates how the “bor- der” had become an entire region, not simply a geographical boundary.

What cultural conflicts emerged in the 1990s?

V O I C E S O F F R E E D O M

1088 ★ CHAPTER 27 From Triumph to Tragedy

From Bill Clinton, Speech on Signing of NAFTA (1993)

The North American Free Trade Agreement was signed by President Bill Clinton early in his first term. It created a free- trade zone (an area where goods can travel freely without paying import duties) composed of Canada, the United States, and Mexico. Clinton asked Americans to accept economic globalization as an inevitable form of progress and the path to future prosperity. “There will be no job loss,” he promised. Things did not entirely work out that way.

As President, it is my duty to speak frankly to the American people about the world in which we now live. Fifty years ago, at the end of World War II, an unchallenged America was protected by the oceans and by our technological superiority and, very frankly, by the economic devastation of the people who could otherwise have been our competi- tors. We chose then to try to help rebuild our former enemies and to create a world of free trade supported by institutions which would facilitate it. . . . As a result, jobs were created, and opportunity thrived all across the world. . . .

For the last 20 years, in all the wealthy countries of the world— because of changes in the global environment, because of the growth of technology, because of increasing competition— the middle class that was created and enlarged by the wise policies of expanding trade at the end of World War II has been under severe stress. Most Ameri- cans are working harder for less. They are vulnerable to the fear tactics and the averse- ness to change that are behind much of the opposition to NAFTA. But I want to say to my fellow Americans: When you live in a time of change, the only way to recover your security and to broaden your horizons is to adapt to the change— to embrace, to move forward. . . . The only way we can recover the fortunes of the middle class in this coun- try so that people who work harder and smarter can, at least, prosper more, the only way we can pass on the American dream of the last 40 years to our children and their children for the next 40, is to adapt to the changes which are occurring.

In a fundamental sense, this debate about NAFTA is a debate about whether we will embrace these changes and create the jobs of tomorrow or try to resist these changes, hoping we can preserve the economic structures of yesterday. . . . I believe that NAFTA will create 1 million jobs in the first 5 years of its impact. . . . NAFTA will generate these jobs by fostering an export boom to Mexico by tearing down tariff walls. . . . There will be no job loss.