An Achilles Heel

More than 30 years ago, crime in the streets became the symbolic linchpin of a powerful new conservative agenda that realigned U.S. politics around thematic caricatures ranging from hippies and pointy-headed professors to welfare Cadillacs and Willie Horton. Today’s liberals hope that crime in the suites can be just as effective and enduring.

Maybe. But probably not in time for the midterm elections in November. A few John Rigases or Martha Stewarts won’t mobilize the U.S. electorate. Deeper worries must bubble, and they’re not likely to shape political debate until the presidential election two years from now.

Crime rarely becomes a dominant national political issue by itself. It usually takes on a high profile when connected to a broader governmental incapacity. In the 1960s and early ‘70s, amid central-city and campus riots and the morass of Vietnam, crime in the streets became Richard M. Nixon’s catchword for a failure of liberal politics, jurisprudence and sociology, as well as excessive belief in the power of government to do good. That deeper worry was the motor that made crime statistics a cutting-edge indicator: the public’s fear of deadly streets, revolutionary campuses, police crippled by liberal judges, ruined neighborhoods, endangered homes.

This year, politics is still looking for its conceptual motor. For crime in the corporate suites to become one, it too must come to symbolize a broader failure, most likely of conservative economic policy.

For many Americans, the failures three decades ago were embodied by student demonstrators, draft evaders, social planners and central-city looters. Realignment-class politics usually requires this kind of gross oversimplification, and any comparable 2002-04 provocation must produce a new set of targets. Philosophers need not apply. Devils would have to be made out of the constituencies and theorists of organized greed, experimental deregulation, financial finagling and corporations uber alles.

You can already see who might make the list: crooked CEOs, gimlet-eyed investment bankers, politicians paid off by the likes of Enron--as well as unethical accountants, shady Wall Street securities analysts, pension-fund skimmers and so on. But it will take two or three more years of high-profile scandal to really ring true.

In place of the sociology, war and urban breakdowns of 30-plus years ago, the most plausible 2002-04 inflammations could be mutual fund evaporations, a popped housing bubble, more stock collapses and beggared pension funds. Top economic officials say that it can’t happen and that the economy is doing well. That is part of the question.

The earlier gestation of crime as a national political issue didn’t happen overnight. Moreover, it was interrupted by an external surprise--Watergate--that for a while seemed to turn the tables as to who stood for law and order and who didn’t. New terrorist strikes could similarly scramble issues in 2002-04.

A renewal of such attacks could affect the crime-in-the-suites issue in at least two ways. It could create a garrison-state America, in which the public’s multiplying fears and anxieties would dwarf worries about executive-suite corruption. But it could also turn the country toward previous, more strict wartime societal attitudes that frowned on black-market behavior and slapped heavy taxes on excess profits during wartime. That kind of “patriotic puritan” America could be extremely hard on the sort of behavior that has been in the news recently.

For the moment, however, terrorism remains in abeyance, allowing Americans to refocus on economic problems that antedated the Sept. 11 attacks. Here the executive-crime issue is important not just as a symbol but also as a barometer--a measurement of how many sectors of the economy have been put at risk by corruption, speculation and greed.

The Internet craze that led to the high-tech bubble and the misbehavior by technology and investment firms associated with it, while expensive to investors, seems like old history. This is lucky for Republicans because nobody is likely to blame them for what went wrong in an industry full of pony-tailed executives and companies with names like Yahoo, Gadzooks and Ask Jeeves.

The next two major industries to self-destruct in the stock and bond markets--telecommunications and energy merchants--suggest more traditional foul play. State and federal deregulation was one factor, political influence-buying another and criminal greed a third.

Here, crime in the suites has produced a cast of obvious criminal personifications--notably, Enron and WorldCom--and a clear ideological bias. Conservative touchstones--overenthusiastic deregulation, permissive corporate governance and a penchant for worshiping markets the way 1960s liberalism knelt at the altar of sociology--have been implicated.

The next and even larger industry charged with both negligence and criminality is the investment business, and finance has been a bugaboo, almost always at conservative expense, for centuries.

New York Atty. Gen. Eliot Spitzer, who forced Merrill Lynch to make a $100-million settlement for the improper activities of its securities analysts, has now turned his attention to Citigroup and its investment subsidiary, Salomon Smith Barney. He’s reportedly investigating whether Citigroup CEO Sanford Weill urged Salomon Smith Barney securities analyst Jack Grubman to issue a bullish report on AT&T; stock in order to land investment-banking business with the telecom company. If true, that would be of great interest to financial reporters who remember the recently repealed Glass-Steagall Act--but a yawner in San Bernardino.

John and Jane Q. Public, however, could wind up reaching for worry beads if scandal significantly threatens the value of their pension funds, mutual funds and homes. Collapses in the technology, telecom and energy sectors have already played havoc with some household assets. The fear is that more damaging disclosures may be coming.

The housing bubble has been talked about incessantly. The danger is that Americans have refinanced their houses and refinanced again, spending their equity to stay afloat. That’s OK if your $300,000 home has only $245,000 borrowed against it. But if the bubble pops, your suburban castle could become a $225,000 house with $245,000 borrowed against it. This is when palms begin to sweat.

Financial nest eggs have been shrinking, and now the uncertainty is spreading to funds. Mutual funds, to begin with, have had two bad years and now face a third in 2002. Some may be endangered by redemptions; others may simply be shut down and merged into other funds at other companies.

The problem with pension funds is more complex because there are several varieties of them. But to make a long story short, many large companies with defined-benefit programs used price gains in their funds’ stock holdings to inflate their profits. What’s all too clear is that they now need to fill the gap by making huge payments to the pension funds. How much of that gap will actually be closed over the next two to three years can be thought of as Sweaty Palms II.

Most of these regulatory gaps and excessive deregulations tap a conservative and Republican set of weaknesses--how many financial villains in old movies were liberals?--and the overall retirement issue is one of their most sensitive. The Bush administration’s proposal to privatize portions of Social Security through individual investments is morphing into the biggest boomerang this side of Australia, drawing rebukes from dozens of GOP congressional contenders.

In short, crime in the suites, if it is to cut deeply as an issue, must get its motor from the broader set of economic loyalties and fallacies that underpin conservative ideological failure and permissiveness. This is why the fact that lots of liberal and Democratic politicians have also taken--no, courted--business and financial money may not be too significant. What will be decisive is whether the full complex of issues develops and the Democratic Party can lay it out and apply the branding iron.

Thirty-odd years ago, part of the reason why voters turned away from liberals and Democrats was that if the problems these officeholders had nurtured were still festering, and if their interest groups were the ones still acting up, was it smart to have them in power? Was it smart to expect liberals to do a good job running welfare, courtrooms, wars or budgets?

Now the worm may have turned, although it’s likely to be 2004 before we can tell. If mutual fund performance remains shaky, pensioners watch Spam prices, permissive economic regulation is still an issue and indicted chief financial officers still smirk in their Bel-Air and Boca Raton mansions, conservatives and Republicans may have their own problem. A big problem.