Davos Man, page 8
He began at the lowest rungs, performing the sweaty work of shoveling slag out of the furnaces, before working his way up to one of the most prized positions—crane driver. From inside a cockpit tucked in the rafters, he operated the controls, guiding a 350-ton ladle that spilled molten hot iron.
It was a difficult job that required finesse and perpetual focus given that a simple mistake could prove expensive or even deadly. He earned $24.62 an hour, allowing him to pay his mortgage. He bought a truck and a boat for fishing trips.
Morrison wanted his three children to penetrate the white-collar world, so he worked as many overtime shifts as he could, salting away savings for college. His daughter completed her master’s in epidemiology. His son enrolled at a nearby private college, McKendree University.
Then, in the fall of 2015, U.S. Steel began slowing production in Granite City. Two days before Christmas, Morrison finished his regular shift at the plant and went into the break room.
“Everybody was standing there like zombies, looking at the bulletin board,” he told me. A list of names was tacked there, his among them. Those on the list were to clean out their lockers.
“I’ve worked since I was twelve,” he said, struggling to comprehend this turn. He had started with a paper route, then taken a job as a cook at his brother’s taco joint.
A blue Steelworkers Union T-shirt hugged his burly frame. His calloused hands attested to years of physical labor. But his $2,000 biweekly paycheck had become a $425-a-week unemployment check. And then the money stopped. He had reached the six-month limit for unemployment benefits.
“I had to tell my son that he can’t go back to McKendree for his junior year,” Morrison said, as he struggled to maintain composure. “He has to go to community college.”
He swallowed hard, tears escaping from the corners of his eyes. “It just crushes you,” he said. “I didn’t get to go to college. I wanted my kids to succeed.”
He had recently interviewed for a job as a supervisor at an Amazon warehouse, but it required computer skills that he lacked. So he took a lower-level job there as a “fulfillment associate”—one of the grunts who wandered the aisles of the warehouse pulling products off shelves and putting them in boxes. It paid $13 an hour, barely half his wages at the steel mill.
On his first day, the supervisors lined up the associates for a preshift team-building exercise. “They said, ‘We’re gonna clap three times, and then we’re gonna yell, “Go shipping floor!”’” Morrison recalled.
He did not comply, bringing the attention of his Amazon bosses.
“A guy came up to me and he goes, ‘We noticed you weren’t clapping,’” Morrison said. “I said, ‘Yeah I’m not into that. That’s not my thing.’ He goes, ‘Well, that’s kind of how we form unity here.’ And I says, ‘Well, I’ve been a union member for over thirty years, and I’ve never clapped once.’ It just made me feel degraded.”
He finished his shift and never returned, eventually landing at another warehouse where he worked nights for $17.50 an hour.
Like most of his fellow steelworkers, Morrison had been a Democrat all his life. And, like many of his union brethren, he was won over by Trump—by his promise to take on China; by his focus on the immigrants who were, in the central mythology of the Trump campaign, stealing jobs.
Morrison found the videotape in which Trump was caught saying that he grabbed women in the crotch to be distasteful, but he figured that was how many politicians behaved. When I asked him whether he accepted Trump’s praise for neo-Nazi marchers and white supremacists, Morrison took a long breath.
“I don’t consider myself a racist in any way,” he said, though he made clear that he bought the central idea of the Trump candidacy—that white people were confronting an existential threat. “The illegal aliens are coming across.”
He wound up not voting for Trump in 2016, swayed by Simmons, who beseeched him to honor his union. But enough others voted with their sympathies to send Trump to the White House. In a nation accustomed to thinking of itself as a land of opportunity, Trump exploited downward mobility combined with lies about immigrants as a pathway to power.
Contrary to the insta-analysis of the moment, Trump did not win simply because he captured white working-class votes. Less than a third of his support51 in 2016 came from that group. Davos Men like Schwarzman embraced Trump as a way to secure tax cuts and deregulation. White voters broadly flocked to Trump for the same reason that they had tended to vote Republican for a generation—in homage to lean government and low taxes, an implicit rebuke of the welfare state that many white Americans were inclined to see as handouts for minorities, even though whites were the most numerous recipients.
But 60 percent of white working-class voters pulled the lever for Trump in 2016, furthering a steady, long-term shift toward Republicans. The counties that had absorbed52 the greatest pressure from imports from China and Mexico showed the largest increases in support for the Republican presidential candidate.
Seven decades after Morgenthau had proclaimed the advent of an age governed by international cooperation, Trump delivered a bellicose inaugural address that could be boiled down to two words: “America First.” He repeated it, as if taunting those who still believed in globalization.
“We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs,” he said.
By 2020, Morrison was back at his old job at the steel mill, crediting that turn with the tariffs Trump applied to Chinese products. He voted for Trump that year.
“The way I feel, the Republicans were for jobs, and the Democrats were for unions,” Morrison told me. “And if you don’t have jobs, you don’t need unions.”
By then, he had come to blame the media for the destruction of middle-class life. He blamed the Democrats, immigrants, social media—everyone but Davos Man, whose plundering was so comprehensive as to be effectively invisible.
Chapter 3
“Suddenly, the Orders Stopped”
Davos Man’s Forebears
To study the evolution of Homo sapiens, we need to examine chimpanzees. If we want to understand Davos Man’s progression, we must go to Italy.
As much as anywhere, wealthy Italians have mastered the art of stashing their money beyond reach of the government. Tax evasion sometimes seems to rival soccer as the national sport—a reality that has bred cynicism within the populace, undermining governance, while making politics noisy, fractious, and prone to elevating incompetent opportunists.
Decades before Davos Man pursued his global pillaging, his forebears were perfecting the technique in Italy. Their looting of the public coffers has weakened the state’s ability to respond to crises like the pandemic, while limiting investment that could produce a more vibrant economy.
One company stands out as an especially pungent example of the Italian elite’s perversion of capitalism for its own benefit. Over generations, Italy’s most powerful people have exploited Fiat, stripping the giant automaker for personal enrichment at public expense.
No one played the con more aggressively than Gianni Agnelli, known throughout Italy as L’Avvocato—the Lawyer.
Born in the northern Italian city of Turin in 1921, Agnelli commanded popular fascination throughout his life. His grandfather founded Fiat, whose rise was emblematic of Italy’s miraculous recovery from the devastation of World War II. The company and the country had grown wealthy in tandem, applying their design and engineering prowess to produce objects that the world coveted.
Agnelli assumed control of the company in 1966. Fiat prospered as the middle class grew, supplying reliable and affordable cars. Its marketing wrapped itself in the flag: The company was Italian in the same way that Ford was American. By 1970, Fiat was making more than 1.4 million vehicles a year in Italy while employing one hundred thousand people.
“Agnelli is Fiat,”1 went a popular slogan, “Fiat is Turin, and Turin is Italy.”
The Agnellis were known as the Kennedys of Italy—their wealth, glamour, fame, brushes with tragedy, and tendency toward scandal operating in equal measure. Gianni favored escapades to the French Riviera behind the wheel of sports cars, and in the company of starlets. In a nation uniquely dedicated to fashion, he was an icon who flouted conventions. “He wore his tie askew2 and his watch atop his cuff to suggest sprezzatura—the Italian art of appearing not to care about one’s appearance—and to disconcert his rivals,” Esquire declared as it enshrined Agnelli on a list of “Best Dressed Men in the History of the World.”
He married another famous tastemaker, a half-American, half-Italian with a title attesting to her noble provenance—Donna Marella Caracciolo dei Principi di Castagneto. An art collector and a fabric designer, she was a frequent presence in fashion magazines. Their marriage was the subject of ceaseless gossip, enhanced by Agnelli’s dalliances with the socialite-cum-diplomat Pamela Harriman and Jackie Kennedy Onassis, the widow of the former American president John F. Kennedy.
At the height of his powers, Agnelli was celebrated as the king of Italian industry and the nation’s richest man, with a fortune estimated at more than $2 billion. His enterprises comprised more than one-fourth of the value of Italy’s stock markets while employing 360,000 people. He owned two of Italy’s most significant newspapers as well as one of the country’s most formidable soccer teams, Juventus. He acquired a controlling stake in Ferrari, a national icon, and led Fiat on a global expansion.
When he died of prostate cancer in 2003, two months shy of his eighty-second birthday, Agnelli’s funeral was broadcast live on national television. More than one hundred thousand people thronged Fiat’s headquarters for a final glimpse of his body before it was carried to Turin’s main cathedral.
Italy’s then prime minister, Silvio Berlusconi (a fellow billionaire), attended the ceremony. Pope John Paul II released a statement celebrating Agnelli as “an authoritative protagonist of some of the most important moments of Italian history.”
But six years after his death, Agnelli was revealed to be something else—a tax cheat of monumental proportions.
This came to light in 2009, as Agnelli’s daughter, Margherita Agnelli, filed a lawsuit against her own mother and several of her legal and financial advisers, accusing them of having hidden part of her father’s assets. The legal machinations pulled back the curtain on a secret that shook Italy. For years, Agnelli had salted away pieces of his fortune overseas.
The impressive haul3 was estimated at 1 billion euros, including luxury apartments scattered around the world, six in Paris alone. Agnelli had hidden his holdings in a tangle of foreign vehicles—a foundation in Liechtenstein, three companies chartered in the British Virgin Islands, and a pair of Swiss entities that contained holding companies in Amsterdam, Luxembourg, and Delaware.
Revered for supplying Italy with cars and paychecks, Agnelli had been quietly enriching accountants and lawyers tucked in every tax haven on earth.
Italian authorities went after Agnelli’s widow and daughter for tax evasion. They eventually settled with the state, though Margherita would again find herself having to account for wealth stashed overseas following the release of the Panama Papers—the trove of leaked documents that revealed how the world’s wealthiest people had hidden their treasure. The papers exposed4 that she, too, had established her own holding company in the British Virgin Islands, stocked with 1.5 billion euros.
By then, Italy had devolved from a shining example of postwar success into Europe’s most hapless major economy. Corruption festered as the Mafia retained its force. The country’s banks were stuffed with loans that would never be repaid, in part because they had been lent in support of dubious ventures run by politically connected overseers. Alarming levels of government debt—a hangover from a public spending binge in the 1980s—limited the state’s capacity to invest in education, health care, and infrastructure.
As a founding member of the European Union, Italy had adopted the euro currency in 1999, gaining the stability and discipline of a monetary system dominated by the debt-averse Germans. But the strict rules of the currency5 limited deficits, preventing the government from spending to promote growth.
Italy had never recovered from the 2008 global financial crisis—the result of Davos Man’s reckless gambling in the casino den of international banking. Grand-scale tax evasion and European prohibitions on deficit spending combined to starve the economy of capital, yielding stagnation.
As youth unemployment soared—exceeding 40 percent by 2013—young people fled, decamping for Britain and France in search of jobs. Many moved back in with their parents, deferring plans for careers and starting families, and contributing to a stark drop in the Italian birth rate. This itself deepened the cause for despair: as the population aged, that spelled fewer working-age people whose taxes could finance pensions and health care for retirees. These grim truths seeped into the Italian vernacular, prompting talk of lost decades, lost generations, lost dreams.
In the south of Italy, where an unremitting sense of economic depression was palpable, I met a twenty-nine-year-old named Elio Vagali, who had sustained himself by cleaning homes and picking tangerines—nearly always under the table, and without the protection of a full-time job. The measure of his desperation was reflected by his most fervent aspiration. He was eager for a job at the Ilva steel mill, a rusting complex in the city of Taranto, on the Ionian Sea. It had been implicated for a cancer cluster in the surrounding community. Vagali was willing to risk his health for a paycheck that would allow him to move out of his parents’ apartment. And still there was no position.
“You either know somebody, or you don’t get in,” Vagali told me when I met him in February 2018. “There’s nothing here for me.”
In the rest of Europe, Davos Man tended to exploit Italy as a cautionary tale as he battered away at union power and urged “fiscal restraint”—his favored term for spending cuts to finance tax cuts for himself. Davos Man would tell you that Italy was what happened when a government disregarded budget constraints while lavishing generous pensions on workers. The near impossibility of firing workers undermined Italy’s efforts to attract investment.
There was truth to these depictions. Italy’s labor protections were extraordinarily bureaucratic, limiting the growth of businesses. Its court system was hopelessly slow, a major reason that banks could not work out their bad debts: they often found it impossible to collect on the collateral. But much of what was wrong with Italy came down to a lack of growth and a shortage of government resources. And Italy’s lack of vigor and perpetually bleak finances were in large part the result of Davos Man’s depredations.
Technocrats in Rome had assented to demands for budget cuts from the European Union under the rules of the bloc. Austerity and tax evasion had combined to leave Italy perpetually short of funds. This helped explain why roads, bridges, and railroads were decaying, and how a sophisticated health care system would buckle in the face of the pandemic. Executives used political connections to gain public support for private companies and then pocketed the proceeds.
Faced with high debts and budget shortfalls, the government focused on improving tax collection to close the gap. In 2009, Prime Minister Silvio Berlusconi—later brought down himself by a tax evasion scandal—introduced a so-called tax shield that invited Italians who had hidden their money overseas to bring it home legally while surrendering a mere 5 percent to the government.
The scheme proved enticing for wealthy people operating in the shadows, and costly for the Italian state. The authorities dropped major investigations into tax evasion that might have netted substantial returns. They surrendered 700 million euros alone in ditching a case against Italians who had deposited their money in the coffers of HSBC’s banking operations6 in Switzerland.
Subsequent Italian administrations intermittently threatened war against tax evaders while proffering amnesty. Italy’s debts rose, its infrastructure deteriorated, and bitterness festered as the poor and middle class watched the country grow increasingly unequal.
By 2014, evasion of European value-added taxes7 alone was costing the Italian treasury upward of 37 billion euros, according to an estimate from the European Union.
Along the way, Fiat traced Italy’s decline, losing money, shedding jobs, and producing cars unwanted by consumers.
Its engineering skill had been supplanted by another talent—dexterity in pulling political strings to secure public largess.
Agnelli was briefly succeeded at Fiat by his brother Umberto. When he, too, died the following year, the company installed Sergio Marchionne as CEO.
Blunt, brash, and singularly devoted to the bottom line, Marchionne eschewed suits, favoring casual attire. He took over a company that was losing 5 million euros a day. Marchionne fired managers and slashed unprofitable businesses. He revealed himself as a Davos Man par excellence, displaying a knack for using crises to extract money from the government.
In August 2005, while most of Italy was at the beach, Marchionne paid a visit to Berlusconi at his residence in Rome. Fiat was considering shuttering its remaining factories in Italy, Marchionne warned, a step that would eliminate tens of thousands of jobs. The only alternative was a public rescue. Marchionne demanded an immediate infusion8 of cash—more than 130 million euros—plus government subsidies for research and development programs, and tax incentives for consumers to buy its cars. Otherwise, Berlusconi would find himself having to explain why Italy’s hallmark company was Italian no more.
Berlusconi agreed. By October 2005, Fiat was profitable again, and paying out dividends to shareholders. Emboldened by this success, Marchionne repeated the gambit, threatening layoffs to secure public aid. He persuaded the government to take responsibility for the bulk of paychecks at a Fiat plant outside Naples. Italy even handed the company money to expand abroad9. Despite public assistance, Fiat shuttered a factory in Sicily, spelling layoffs for 1,500 workers.
