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mostlysignssomeportents · 11 months

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The long, bloody lineage of private equity's looting

Tomorrow (June 3) at 1:30PM, I’m in Edinburgh for the Cymera Festival on a panel with Nina Allen and Ian McDonald.

Monday (June 5) at 7:15PM, I’m in London at the British Library with my novel Red Team Blues, hosted by Baroness Martha Lane Fox.

Fans of the Sopranos will remember the “bust out” as a mob tactic in which a business is taken over, loaded up with debt, and driven into the ground, wrecking the lives of the business’s workers, customers and suppliers. When the mafia does this, we call it a bust out; when Wall Street does it, we call it “private equity.”

It used to be that we rarely heard about private equity, but then, as national chains and iconic companies started to vanish, this mysterious financial arrangement popped up with increasing frequency. When a finance bro’s presentation on why Olive Garden needed to be re-orged when viral, there was a lot off snickering about the decline of a tacky business whose value prop was unlimited carbs. But the bro was working for Starboard Value, a hedge fund that specialized in buhying out and killing off companies, pocketing billions while destroying profitable businesses.

https://www.salon.com/2014/09/17/the_real_olive_garden_scandal_why_greedy_hedge_funders_suddenly_care_so_much_about_breadsticks/

Starboard Value’s game was straightforward: buy a business, load it with debt, sell off its physical plant — the buildings it did business out of — pay itself, and then have the business lease back the buildings, bleeding out money until it collapsed. They pulled it with Red Lobster,and the point of the viral Olive Garden dis track was to soften up the company for its own bust out.

The bust out tactic wasn’t limited to mocking middlebrow family restaurants. For years, the crooks who ran these ops did a brisk trade in blaming the internet. Why did Sears tank? Everyone knows that the 19th century business was an antique, incapable of mounting a challenge in the age of e-commerce. That was a great smokescreen for an old-fashioned bust out that saw corporate looters make off with hundreds of millions, leaving behind empty storefronts and emptier pension accounts for the workers who built the wealth the looters stole:

https://prospect.org/economy/vulture-capitalism-killed-sears/

Same goes for Toys R Us: it wasn’t Amazon that killed the iconic toy retailer — it was the PE bosses who extracted $200m from the chain, then walked away, hands in pockets and whistling, while the businesses collapsed and the workers got zero severance:

https://www.washingtonpost.com/news/business/wp/2018/06/01/how-can-they-walk-away-with-millions-and-leave-workers-with-zero-toys-r-us-workers-say-they-deserve-severance/

It’s a good racket — for the racketeers. Private equity has grown from a finance sideshow to Wall Street’s apex predator, and it’s devouring the real economy through a string of audactious bust outs, each more consequential and depraved than the last.

As PE shows that it can turn profitable businesses gigantic windfalls, sticking the rest of us with the job of sorting out the smoking craters they leave behind, more and more investors are piling in. Today, the PE sector loves a rollup, which is when they buy several related businesses and merge them into one firm. The nominal business-case for a rollup is that the new, bigger firm is more “efficient.” In reality, a rollup’s strength is in eliminating competition. When all the pet groomers, or funeral homes, or urgent care clinics for ten miles share the same owner, they can raise prices, lower wages, and fuck over suppliers.

They can also borrow. A quirk of the credit markets is that a standalone small business is valued at about 3–5x its annual revenues. But if that business is part of a large firm, it is valued at 10–20x annual turnover. That means that when a private equity company rolls up a comedy club, ad agency or water bottler (all businesses presently experiencing PE rollup), with $1m in annual revenues, it shows up on the PE company’s balance sheet as an asset worth $10–20m. That’s $10–20m worth of collateral the PE fund can stake for loans that let it buy and roll up more small businesses.

2.9 million Boomer-owned businesses, employing 32m people, are expected to sell in the next couple years as their owners retire. Most of these businesses will sell to PE firms, who can afford to pay more for them as a prelude to a bust out than anyone intending to operate them as a productive business could ever pay:

https://pluralistic.net/2022/12/16/schumpeterian-terrorism/#deliberately-broken

PE’s most ghastly impact is felt in the health care sector. Whole towns’ worth of emergency rooms, family practices, labs and other health firms have been scooped up by PE, which has spent more than $1t since 2012 on health acquisitions:

https://pluralistic.net/2022/11/17/the-doctor-will-fleece-you-now/#pe-in-full-effect

Once a health care company is owned by PE, it is significantly more likely to commit medicare fraud. It also cuts wages and staffing for doctors and nurses. PE-owned facilities do more unnecessary and often dangerous procedures. Appointments get shorter. The companies get embroiled in kickback scandals. PE-backed dentists hack away at children’s mouths, filling them full of root-canals.

https://pluralistic.net/2022/11/17/the-doctor-will-fleece-you-now/#pe-in-full-effect

The Healthcare Private Equity Association boasts that its members are poised to spend more than $3t to create “the future of healthcare.”

https://hcpea.org/#!event-list

As bad as PE is for healthcare, it’s worse for long-term care. PE-owned nursing homes are charnel houses, and there’s a particularly nasty PE scam where elderly patients are tricked into signing up for palliative care, which is never delivered (and isn’t needed, because the patients aren’t dying!). These fake “hospices” get huge payouts from medicare — and the patient is made permanently ineligible for future medicare, because they are recorded being in their final decline:

https://pluralistic.net/2023/04/26/death-panels/#what-the-heck-is-going-on-with-CMS

Every part of the health care sector is being busted out by PE. Another ugly PE trick, the “club deal,” is devouring the medical supply business. Club deals were huge in the 2000s, destroying rent-controlled housing, energy companies, Mervyn’s department stores, Harrah’s, and Old Country Joe. Now it’s doing the same to medical supplies:

https://pluralistic.net/2021/05/14/billionaire-class-solidarity/#club-deals

Private equity is behind the mass rollup of single-family homes across America. Wall Street landlords are the worst landlords in America, who load up your rent with junk fees, leave your home in a state of dangerous disrepair, and evict you at the drop of a hat:

https://pluralistic.net/2021/08/16/die-miete-ist-zu-hoch/#assets-v-human-rights

As these houses decay through neglect, private equity makes a bundle from tenants and even more borrowing against the houses. In a few short years, much of America’s desperately undersupplied housing stock will be beyond repair. It’s a bust out.

You know all those exploding trains filled with dangerous chemicals that poison entire towns? Private equity bust outs:

https://pluralistic.net/2022/02/04/up-your-nose/#rail-barons

Where did PE come from? How can these people look themselves in the mirror? Why do we let them get away with it? How do we stop them?

Today in The American Prospect, Maureen Tkacik reviews two new books that try to answer all four of these questions, but really only manage to answer the first three:

https://prospect.org/culture/books/2023-06-02-days-of-plunder-morgenson-rosner-ballou-review/

The first of these books is These Are the Plunderers: How Private Equity Runs — and Wrecks — America by Gretchen Morgenson and Joshua Rosner:

https://www.simonandschuster.com/books/These-Are-the-Plunderers/Gretchen-Morgenson/9781982191283

The second is Plunder: Private Equity’s Plan to Pillage America, by Brendan Ballou:

https://www.hachettebookgroup.com/titles/brendan-ballou/plunder/9781541702103/

Both books describe the bust out from the inside. For example, PetSmart — looted for $30 billion by RaymondSvider and his PE fund BC Partners — is a slaughterhouse for animals. The company systematically neglects animals — failing to pay workers to come in and feed them, say, or refusing to provide backup power to run during power outages, letting animals freeze or roast to death. Though PetSmart has its own vet clinics, the company doesn’t want to pay its vets to nurse the animals it damages, so it denies them care. But the company is also too cheap to euthanize those animals, so it lets them starve to death. PetSmart is also too cheap to cremate the animals, so its traumatized staff are ordered to smuggle the dead, rotting animals into random dumpsters.

All this happened while PetSmart’s sales increased by 60%, matched by growth in the company’s gross margins. All that money went to the bust out.

https://www.forbes.com/sites/antoinegara/2021/09/27/the-30-billion-kitty-meet-the-investor-who-made-a-fortune-on-pet-food/

Tkacik says these books show that we’re finally getting wise to PE. Back in the Clinton years, the PE critique painted the perps as sharp operators who reduced quality and jacked up prices. Today, books like these paint these “investors” as the monsters they are — crooks whose bust ups are crimes, not clever finance hacks.

Take the Carlyle Group, which pioneered nursing home rollups. As Carlyle slashed wages, its workers suffered — but its elderly patients suffered more. Thousands of Carlyle “customers” died of “dehydration, gangrenous bedsores, and preventable falls” in the pre-covid years.

https://www.washingtonpost.com/business/economy/opioid-overdoses-bedsores-and-broken-bones-what-happened-when-a-private-equity-firm-sought-profits-in-caring-for-societys-most-vulnerable/2018/11/25/09089a4a-ed14-11e8-baac-2a674e91502b_story.html

KKR, another PE monster, bought a second-hand chain of homes for mentally disabled adults from another PE company, then squeezed it for the last drops of blood left in the corpse. KKR cut wages to $8/hour and increased shifts to 36 hours, then threatened to have workers who went home early arrested and charged with “patient abandonment.” Many of these homes were often left with no staff at all, with patients left to starve and stew in their own waste.

PE loves to pick on people who can’t fight back: kids, sick people, disabled people, old people. No surprise, then, that PE loves prisons — the ultimate captive audience. HIG Capital is a $55b fund that owns TKC Holdings, who got the contract to feed the prisoners at 400 institutions. They got the contract after the prisons fired Aramark, owned by PE giant Warburg Pincus, whose food was so inedible that it provoked riots. TKC got a million bucks extra to take over the food at Michigan’s Kinross Correctional Facility, then, incredibly, made the food worse. A chef who refused to serve 100 bags of rotten potatoes (“the most disgusting thing I’ve seen in my life”) was fired:

https://www.wzzm13.com/article/news/local/michigan/prison-food-worker-i-was-fired-for-refusing-to-serve-rotten-potatoes/69-467297770

TKC doesn’t just operate prison kitchens — it operates prison commissaries, where it gouges prisoners on junk food to replace the inedible slop it serves in the cafeteria. The prisoners buy this food with money they make working in the prison workshops, for $0.10–0.25/hour. Those workshops are also run by TKC.

Tkacic traces private equity back to the “corporate raiders” of the 1950s and 1960s, who “stealthily borrowed money to buy up enough shares in a small or midsized company to control its biggest bloc of votes, then force a stock swap and install himself as CEO.”

The most famous of these raiders was Eli Black, who took over United Fruit with this gambit — a company that had a long association with the CIA, who had obligingly toppled democratically elected governments and installed dictators friendly to United’s interests (this is where the term “banana republic” comes from).

Eli Black’s son is Leon Black, a notorious PE predator. Leon Black got his start working for the junk-bonds kingpin Michael Milken, optimizing Milken’s operation, which was the most terrifying bust out machine of its day, buying, debt-loading and wrecking a string of beloved American businesses. Milken bought 2,000 companies and put 200 of them through bankruptcy, leaving the survivors in a brittle, weakened state.

It got so bad that the Business Roundtable complained about the practice to Congress, calling Milken, Black, et al, “a small group is systematically extracting the equity from corporations and replacing it with debt, and incidentally accumulating major wealth.”

Black stabbed Milken in the back and tanked his business, then set out on his own. Among the businesses he destroyed was Samsonite, “a bankrupt-but-healthy company he subjected to 12 humiliating years of repeated fee extractions, debt-funded dividend payments, brutal plant closings, and hideous schemes to induce employees to buy its worthless stock.”

The money to buy Samsonite — and many other businesses — came through a shadowy deal between Black and John Garamendi, then a California insurance commissioner, now a California congressman. Garamendi helped Black buy a $6b portfolio of junk bonds from an insurance company in a wildly shady deal. Garamendi wrote down the bonds by $3.9b, stealing money “from innocent people who needed the money to pay for loved ones’ funerals, irreparable injuries, etc.”

Black ended up getting all kinds of favors from powerful politicians — including former Connecticut governor John Rowland and Donald Trump. He also wired $188m to Jeffrey Epstein for reasons that remain opaque.

Black’s shady deals are a marked contrast with the exalted political circles he travels in. Despite private equity’s obviously shady conduct, it is the preferred partner for cities and states, who buy everything from ambulance services to infrastructure from PE-owned companies, with disastrous results. Federal agencies turn a blind eye to their ripoffs, or even abet them. 38 state houses passed legislation immunizing nursing homes from liability during the start of the covid crisis.

PE barons are shameless about presenting themselves as upstanding cits, unfairly maligned. When Obama made an empty promise to tax billionaires in 2010, Blackstone founder SteveS chwarzman declared, “It’s a war. It’s like when Hitler invaded Poland in 1939.”

Since we’re on the subject of Hitler, this is a good spot to bring up Monowitz, a private-sector satellite of Auschwitz operated by IG Farben as a slave labor camp to make rubber and other materiel it supplied at a substantial markup to the wermacht. I’d never heard of Monowitz, but Tkacik’s description of the camp is chilling, even in comparison to Auschwitz itself.

Farben used slave laborers from Auschwitz to work at its rubber plant, but was frustrated by the logistics of moving those slaves down the 4.5m stretch of road to the facility. So the company bought 25,000 slaves — preferring children, who were cheaper — and installed them in a co-located death-camp called Monowitz:

https://www.commentary.org/articles/r-tannenbaum/the-devils-chemists-by-josiah-e-dubois-jr/

Monowitz was — incredibly — worse than Auschwitz. It was so bad, the SS guards who worked at it complained to Berlin about the conditions. The SS demanded more hospitals for the workers who dropped from beatings and overwork — Farben refused, citing the cost. The factory never produced a steady supply of rubber, but thanks to its gouging and the brutal treatment of its slaves, the camp was still profitable and returned large dividends to Farben’s investors.

Apologists for slavery sometimes claim that slavers are at least incentivized to maintain the health of their captive workforce. This was definitely not true of Farben. Monowitz slaves died on average after three months in the camp. And Farben’s subsidiary, Degesch, made the special Zyklon B formulation used in Auschwitz’s gas chambers.

Tkacik’s point is that the Nazis killed for ideology and were unimaginably cruel. Farben killed for money — and they were even worse. The banality of evil gets even more banal when it’s done in service to maximizing shareholder value.

As Farben historian Joseph Borkin wrote, the company “reduced slave labor to a consumable raw material, a human ore from which the mineral of life was systematically extracted”:

https://www.scribd.com/document/517797736/The-Crime-and-Punishment-of-I-G-Farben

Farben’s connection to the Nazis was a the subject of Germany’s Master Plan: The Story of Industrial Offensive, a 1943 bestseller by Borkin, who was also an antitrust lawyer. It described how Farben had manipulated global commodities markets in order to create shortages that “guaranteed Hitler’s early victories.”

Master Plan became a rallying point in the movement to shatter corporate power. But large US firms like Dow Chemical and Standard Oil waged war on the book, demanding that it be retracted. Borkin was forced into resignation and obscurity in 1945.

Meanwhile, in Nuremberg, 24 Farben executives were tried for their war crimes, and they cited their obligations to their shareholders in their defense. All but five were acquitted on this basis.

Seen in that light, the plunderers of today’s PE firms are part of a long and dishonorable tradition, one that puts profit ahead of every other priority or consideration. It’s a defense that wowed the judges at Nuremberg, so should we be surprised that it still plays in 2023?

Tkacik is frustrated that neither of these books have much to offer by way of solutions, but she understands why that would be. After all, if we can’t even close the carried interest tax loophole, how can we hope to do anything meaningful?

“Carried interest” comes up in every election cycle. Most of us assume it has something to do with “interest payments,” but that’s not true. The carried interest loophole relates to the “interest” that 16th-century sea captains had in their cargo. It’s a 600-year-old tax loophole that private equity bosses use to pay little or no tax on their billions. The fact that it’s still on the books tells you everything you need to know about whether our political class wants to do anything about PE’s plundering.

Notwithstanding Tkacik’s (entirely justified) skepticism of the weaksauce remedies proposed in these books, there is some hope of meaningful action. Private equity’s rollups are only possible because they skate under the $101m threshold for merger scrutiny. However, there is good — but unenforced — law that allows antitrust enforcers to block these mergers. This is the “incipiency standard” — Sec 7 of the Clayton Act — the idea that a relatively small merger might not be big enough to trigger enforcement action on its own, but regulators can still act to block it if it creates an incipient monopoly.

https://pluralistic.net/2022/12/16/schumpeterian-terrorism/#deliberately-broken

The US has a new crop of aggressive — fearless — top antitrust enforcers and they’ve been systematically reviving these old laws to go after monopolies.

That’s long overdue. Markets are machines for eroding our moral values: “In comparison to non-market decisions, moral standards are significantly lower if people participate in markets.”

https://web.archive.org/web/20130607154129/https://www.uni-bonn.de/Press-releases/markets-erode-moral-values

The crimes that monsters commit in the name of ideology pale in comparison to the crimes the wealthy commit for money.

Catch me on tour with Red Team Blues in Edinburgh, London, and Berlin!

If you’d like an essay-formatted version of this post to read or share, here’s a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2023/06/02/plunderers/#farbenizers

[Image ID: An overgrown graveyard, rendered in silver nitrate monochrome. A green-tinted businessman with a moneybag in place of a head looms up from behind a gravestone. The right side of the image is spattered in blood.]

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mostlysignssomeportents · 9 months

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Denazification, truth and reconciliation, and the story of Germany's story

Germany is the “world champion in remembrance,” celebrated for its post-Holocaust policies of ensuring that every German never forgot what had been done in their names, and in holding themselves and future generations accountable for the Nazis’ crimes.

All my life, the Germans have been a counterexample to other nations, where the order of the day was to officially forget the sins that stained the land. “Least said, soonest mended,” was the Canadian and American approach to the genocide of First Nations people and the theft of their land. It was, famously, how America, especially the American south, dealt with the legacy of slavery and Jim Crow.

Silence begets forgetting, which begets revisionism. The founding crimes of our nations receded into the mists of time and acquired a gauzy, romantic veneer. Plantations — slave labor camps where work was obtained through torture, maiming and murder — were recast as the tragiromantic settings of Gone With the Wind. The deliberate extinction of indigenous peoples was revised as the “taming of the New World.” The American Civil War was retold as “The Lost Cause,” fought over states’ rights, not over the right of the ultra-wealthy to terrorize kidnapped Africans and their descendants into working to death.

This wasn’t how they did it in Germany. Nazi symbols and historical revisionism were banned (even the Berlin production of “The Producers” had to be performed without swastikas). The criminals were tried and executed. Every student learned what had been done. Cash reparations were paid — to Jews, and to the people whom the Nazis had conquered and brutalized. Having given in to ghastly barbarism on an terrifyingly industrial scale, the Germans had remade themselves with characteristic efficiency, rooting out the fascist rot and ensuring that it never took hold again.

But Germany’s storied reformation was always oversold. As neo-Nazi movements sprang up and organized political parties — like the far-right Alternative für Deutschland — fielded fascist candidates, they also took to the streets in violent mobs. Worse, top German security officials turned out to be allied with AfD:

https://www.wsws.org/en/articles/2018/08/04/germ-a04.html

Neofascists in Germany had fat bankrolls, thanks to generous, secret donations from some of the country’s wealthiest billionaires:

https://www.spiegel.de/international/germany/billionaire-backing-may-have-helped-launch-afd-a-1241029.html

And they broadened their reach by marrying their existing conspiratorial beliefs with Qanon, which made their numbers surge:

https://www.thedailybeast.com/how-fringe-groups-are-using-qanon-to-amplify-their-wild-messages

Today, the far right is surging around Europe, with the rot spreading from Hungary and Poland to Italy and France. In an interview with Jacobin’s David Broder, Tommaso Speccher a researcher based in Berlin, explores the failure of Germany’s storied memory:

https://jacobin.com/2023/07/germany-nazism-holocaust-federal-republic-memory-culture/

Speccher is at pains to remind us that Germany’s truth and reconciliation proceeded in fits and starts, and involved compromises that were seldom discussed, even though they left some of the Reich’s most vicious criminals untouched by any accountability for their crimes, and denied some victims any justice — or even an apology.

You may know that many queer people who were sent to Nazi concentration camps were immediately re-imprisoned after the camps were liberated. Both Nazi Germany and post-Nazi Germany made homosexuality a crime:

https://time.com/5953047/lgbtq-holocaust-stories/

But while there’s been some recent historical grappling with this jaw-dropping injustice, there’s been far less attention given to the plight of the communists, labor organizers, social democrats and other leftists whom the Nazis imprisoned and murdered. These political prisoners (and their survivors) struggled mightily to get the reparations they were due.

Not only was the process punitively complex, but it was administered by bureaucrats who had served in the Reich — the people who had sent them to the camps were in charge of deciding whether they were due compensation.

This is part of a wider pattern. The business-leaders who abetted the Reich through their firms — Siemens, BMW, Hugo Boss, IG Farben, Volkswagon — were largely spared any punishment for their role in the the Holocaust. Many got to keep the riches they acquired through their part on an act of genocide.

Meanwhile, historians grappling with the war through the “Historikerstreit” drew invidious comparisons between communism and fascism, equating the two ideologies and tacitly excusing the torture and killing of political prisoners (this tale is still told today — in America! My kid’s AP history course made this exact point last year).

The refusal to consider that extreme wealth, inequality, and the lust for profits — not blood — provided the Nazis with the budget, materiel and backing they needed to seize control in Germany is of a piece with the decision not to hold Germany’s Nazi-enabling plutocrats to account.

The impunity for business leaders who collaborated with the Nazis on exploiting slave labor is hard to believe. Take IG Farben, a company still doing a merry business today. Farben ran a rubber factory on Auschwitz slave labor, but its executives were frustrated by the delays occasioned by the daily 4.5m forced march from the death-camp to its factory:

https://pluralistic.net/2023/06/02/plunderers/#farben

So Farben built Monowitz, its own, private-sector concentration camp. IG Farben purchased 25,000 slaves from the Reich, among them as many children as possible (the Reich charged less for child slaves).

Even by the standards of Nazi death camps, Monowitz was a charnel house. Monowitz’s inmates were worked to death in just three months. The conditions were so brutal that the SS guards sent official complaints to Berlin. Among their complaints: Farben refused to fund extra hospital beds for the slaves who were beaten so badly they required immediate medical attention.

Farben broke the historical orthodoxy about slavery: until Monowitz, historians widely believed that enslavers would — at the very least — seek to maintain the health of their slaves, simply as a matter of economic efficiency. But the Reich’s rock-bottom rates for fresh slaves liberated Farben from the need to preserve their slaves’ ability to work. Instead, the slaves of Monowitz became disposable, and the bloodless logic of profit maximization dictated that more work could be attained at lower prices by working them to death over twelve short weeks.

Few of us know about Monowitz today, but in the last years of the war, it shocked the world. Joseph Borkin — a US antitrust lawyer who was sent to Germany after the war as part of the legal team overseeing the denazification program — wrote a seminal history of IG Farben, “The Crime and Punishment of I.G. Farben”:

https://www.scribd.com/document/517797736/The-Crime-and-Punishment-of-I-G-Farben

Borkin’s book was a bestseller, which enraged America’s business lobby. The book made the connection between Farben’s commercial strategies and the rise of the Reich (Farben helped manipulate global commodity prices in the runup to the war, which let the Reich fund its war preparations). He argued that big business constituted a danger to democracy and human rights, because its leaders would always sideline both in service to profits.

US companies like Standard Oil and Dow Chemicals poured resources into discrediting the book and smearing Borkin, forcing him into retirement and obscurity in 1945, the same year his publisher withdrew his book from stores.

When we speak of Germany’s denazification effort, it’s as a German program, but of course that’s not right. Denazification was initiated, designed and overseen by the war’s winners — in West Germany, that was the USA.

Those US prosecutors and bureaucrats wanted justice, but not too much of it. For them, denazification had to be balanced against anticommunism, and the imperatives of American business. Nazi war criminals must go on trial — but not if they were rocket scientists, especially not if the USSR might make use of them:

https://en.wikipedia.org/wiki/Wernher_von_Braun

Recall that in the USA, the bizarre epithet “premature antifascist” was used to condemn Americans who opposed Nazism (and fascism elsewhere in Europe) too soon, because these antifascists opposed the authoritarian politics of big business in America, too:

https://www.thenation.com/article/archive/premature-antifascist-and-proudly-so/

When 24 Farben executives were tried at Nuremberg for the slaughter at Monowitz, then argued that they had no choice but to pursue slave labor — it was their duty to their shareholders. The judges agreed: 19 of those executives walked.

Anticommunism hamstrung denazification. There was no question that German elites and its largest businesses were complicit in Nazi crimes — not mere suppliers, but active collaborators. Antifacism wasn’t formally integrated into the denazification framework until the 1980s with “constitutional patriotism,” which took until the 1990s to take firm root.

The requirement for a denazification program that didn’t condemn capitalism meant that there would always be holes in Germany’s truth and reconciliation process. The newly formed Federal Republic set aside Article 10 of the Nuremberg Charter, which would hold all members of the Nazi Party and SS responsible for their crimes. But Article 10 didn’t survive contact with the Federal Republic: immediately upon taking office, Konrad Adenauer suspended Article 10, sparing 10 million war criminals.

While those spared included many rank-and-file order-followers, it also included many of the Reich’s most notorious criminals. The Nazi judge who sent Erika von Brockdorff to her death for her leftist politics was given a judge’s pension after the war, and lived out his days in a luxurious mansion.

Not every Nazi was pensioned off — many continued to serve in the post-war West German government. Even as Willy Brandt was demonstrating historic remorse for Germany’s crimes, his foreign ministry was riddled with ex-Nazi bureaucrats who’d served in Hitler’s foreign ministry. We still remember Brandt’s brilliant 1973 UN speech on the Holocaust:

https://www.willy-brandt-biography.com/historical-sources/videos/speech-uno-new-york-1973/

But recollections of Brandt’s speech are seldom accompanied by historian Götz Aly’s observation that Brandt couldn’t have given that speech in Germany without serious blowback from the country’s still numerous and emboldened antisemites (Brandt donated his Nobel prize money to restore Venice’s Scuola Grande Tedesca synagogue, but ensured that this was kept secret until after his death).

All this to say that Germany’s reputation as “world champions of memory” is based on acts undertaken decades after the war. Some of Germany’s best-known Holocaust memorials are very recent, like the Wannsee Conference House (1992), the Memorial to the Murdered Jews of Europe (2005), and the Topography of Terror Museum in (2010).

Germany’s remembering includes an explicit act of forgetting — forgetting the role Germany’s business leaders and elites played in Hitler’s rise to power and the Nazi crimes that followed. For Speccher, the rise of neofacist movements in Germany can’t be separated from this selective memory, weighed down by anticommunist fervor.

And in East Germany, there was a different kind of incomplete rememberance. While the DDR’s historians and teachings emphasized the role of business in the rise of fascism, they excluded all the elements of Nazism rooted in bigotry: antisemitism, homophobia, sectarianism, and racism. For East German historians, Nazism wasn’t about these, it was solely “the ultimate end point of the history of capitalism.”

Neither is sufficient to prevent authoritarianism and repression, obviously. But the DDR is dust, and the anticommunism-tainted version of denazification is triumphant. Today, Europe’s wealthiest families and largest businesses are funneling vast sums into far-right “populist” parties that trade in antisemitic “Great Replacement” tropes and Holocaust denial:

https://corporateeurope.org/sites/default/files/2019-05/Europe%E2%80%99s%20two-faced%20authoritarian%20right%20FINAL_1.pdf

And Germany’s coddled aristocratic families and their wealthy benefactors — whose Nazi ties were quietly forgiven after the war — conspire to overthrow the government and install a far-right autocracy:

https://www.reuters.com/world/europe/25-suspected-members-german-far-right-group-arrested-raids-prosecutors-office-2022-12-07/

In recent years, I’ve spent a lot of time thinking about denazification. For all the flaws in Germany’s remembrance, it stands apart as one of the brightest lights in national reckonings with unforgivable crimes. Compare this with, say, Spain, where the remains of fascist dictator Francisco Franco were housed in a hero’s monument, amidst his victims’ bones, until 2019:

https://en.wikipedia.org/wiki/Pedro_S%C3%A1nchez#Domestic_policy

What do you do with the losers of a just war? “Least said soonest mended” was never a plausible answer, and has been a historical failure — as the fields of fluttering Confederate flags across the American south can attest (to say nothing of the failure of American de-ba’athification in Iraq):

https://en.wikipedia.org/wiki/De-Ba%27athification

But on the other hand, people who lose the war aren’t going to dig a hole, climb in and pull the dirt down on top of themselves. Just because I think Germany’s denazification was hobbled by the decision to lets its architects and perpetrators walk free, I don’t know that I would have supported prison for all ten million people captured by Article 10.

And it’s not clear that an explicit antifascism from the start would have patched the holes in German denazification. As Speccher points out, Italy’s postwar constitution was explicitly antifascist, the nation “steeped in institutional anti-fascism.” Postwar Italian governments included prominent resistance fighters who’d fought Mussolini and his brownshirts.

But in the 1990s, “the end of the First Republic” saw constitutional reforms that removed antifascism — reforms that preceded the rise of the corrupt authoritarian Silvio Berlusconi — and there’s a line from him to the neofascists in today’s ruling Italian coalition.

Is there any hope for creating a durable, democratic, anti-authoritarian state out of a world run by the descendants of plunderers and killers? Can any revolution — political, military or technological — hope to reckon with (let alone make peace with!) the people who have brought us to this terrifying juncture?

[Image ID: The Tor Books cover for ‘The Lost Cause,’ designed by Will Staehle, featuring the head of the snake on the Gadsen ‘Don’t Tread on Me’ flag, shedding a tear.]

Like I say, this is something I’ve spent a lot of time thinking about — not just how we might get out of this current mess, but how we’ll stay out of it. As is my wont, I’ve worked out my anxieties on the page. My next novel, The Lost Cause, comes out from Tor Books and Head of Zeus in November:

https://us.macmillan.com/books/9781250865939/the-lost-cause

Lost Cause is a post-GND utopian novel about a near-future world where the climate emergency is finally being treated with the seriousness and urgency it warrants. It’s a world wracked by fire, flood, scorching heat, mass extinctions and rolling refugee crises — but it’s also a world where we’re doing something about all this. It’s not an optimistic book, but it is a hopeful one. As Kim Stanley Robison says:

This book looks like our future and feels like our present — it’s an unforgettable vision of what could be. Even a partly good future will require wicked political battles and steadfast solidarity among those fighting for a better world, and here I lived it along with Brooks, Ana Lucía, Phuong, and their comrades in the struggle. Along with the rush of adrenaline I felt a solid surge of hope. May it go like this.

The Lost Cause is a hopeful book, but it’s also a worried one. The book is set during a counter-reformation, where an unholy alliance of seagoing anarcho-capitalist wreckers and white nationalist militias are trying to seize power, snatching defeat from the jaws of the fragile climate victory. It’s a book about the need for truth and reconciliation — and its limits.

As Bill McKibben says:

The first great YIMBY novel, this chronicle of mutual aid is politically perceptive, scientifically sound, and extraordinarily hopeful even amidst the smoke. Forget the Silicon Valley bros — these are the California techsters we need rebuilding our world, one solar panel and prefab insulated wall at a time.

We’re currently in the midst of a decidedly unjust war — the war to continue roasting the planet, a war waged in the name of continuing enrichment of the world’s already-obscenely-rich oligarchs. That war requires increasingly authoritarian measures, increasing violence and repression.

I believe we can win this war and secure a habitable planet for all of us — hell, I believe we can build a world of comfort and abundance out of its ashes, far better than this one:

https://tinyletter.com/metafoundry/letters/metafoundry-75-resilience-abundance-decentralization

But even if that world comes to being, there will be millions of people who hate it, a counter-revolution in waiting. These are our friends, our relatives, our neighbors. Figuring out how to make peace with them — and how to hold their most culpable, most powerful leaders to account — is a project that’s as important, and gigantic, and uncertain, as a just transition is.

Next weekend, I’ll be at San Diego Comic-Con:

Thu, Jul 20 16h: Signing, Tor Books booth #2802 (free advance copies of The Lost Cause— Nov 2023 — to the first 50 people!)

Fri, Jul 21 1030h: Wish They All Could be CA MCs, room 24ABC (panel)

Fri, Jul 21 12h: Signing, AA09

Sat, Jul 22 15h: The Worlds We Return To, room 23ABC (panel)

If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2023/07/19/stolpersteine/#truth-and-reconciliation

[Image ID: Three 'stumbling stones' ('stolpersteine') set into the sidewalk in the Mitte, in Berlin; they memorialize Jews who lived nearby until they were deported to Auschwitz and murdered.]

#pluralistic #stolpersteine #historians' dispute #Historikerstreit #nazis #godwin's law #mussolini #berlusconi #italy #antifa #fascism #history #truth and reconciliation #the lost cause #denazification

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