When Jim Crow Drank Coke l NYT OpEd l GRACE ELIZABETH HALE

OPINION

OP-ED CONTRIBUTOR

When Jim Crow Drank Coke

By GRACE ELIZABETH HALE
Published: January 29, 2013

CHARLOTTESVILLE, Va.

THE opposition by the New York State chapter of the N.A.A.C.P. to Mayor Michael R. Bloomberg’s restrictions on sugary soda caught many Americans by surprise. But it shouldn’t: though the organization argues it is standing up for consumer choice and minority business owners, who it claims would be hurt, this is also a favor for a stalwart ally – Coca-Cola alone has given generously to support N.A.A.C.P. initiatives over the years.

This is more than a story of mutual back-scratching, though. It is the latest episode in the long and often fractious history of soft drinks, prohibition laws and race.

While it is widely known that John Pemberton, an Atlanta pharmacist, invented Coke as a kind of patent medicine, it was in fact his second drink. His first, an 1884 invention called French Wine Coca, was a copy of a popular French wine that contained cocaine. But in November 1885, just as the product began to sell, Atlanta outlawed alcohol sales.

Across the nation, support for prohibition was often tied to the desire by native whites to control European Catholics, American Indians, Asian-Americans and, especially in the South, African-Americans. It gave police officers an excuse to arrest African-Americans on the pretext of intoxication.

Pemberton went to work on a “temperance drink” with the same “medicinal” effects, and he introduced Coca-Cola in 1886. At the time, the soda fountains of Atlanta pharmacies had become fashionable gathering places for middle-class whites as an alternative to bars. Mixed with soda water, the drink quickly caught on as an “intellectual beverage” among well-off whites.

Eliminating alcohol granted only a temporary reprieve. Though Asa G. Candler, who had taken over the business, kept the formula secret, an Atlanta paper revealed in 1891 what many consumers – who called the soda “dope” – already knew: Coca-Cola contained cocaine.

Candler began marketing the drink as “refreshing” rather than medicinal, and managed to survive the controversy. But concerns exploded again after the company pioneered its distinctive glass bottles in 1899, which moved Coke out of the segregated spaces of the soda fountain. Anyone with a nickel, black or white, could now drink the cocaine-infused beverage. Middle-class whites worried that soft drinks were contributing to what they saw as exploding cocaine use among African-Americans. Southern newspapers reported that “negro cocaine fiends” were raping white women, the police powerless to stop them. By 1903, Candler had bowed to white fears (and a wave of anti-narcotics legislation), removing the cocaine and adding more sugar and caffeine.

Coke’s recipe wasn’t the only thing influenced by white supremacy: through the 1920s and ’30s, it studiously ignored the African-American market. Promotional material appeared in segregated locations that served both races, but rarely in those that catered to African-Americans alone.

Meanwhile Pepsi, the country’s second largest soft drink company, had tried to fight Coke by selling its sweeter product in a larger bottle for the same price. Still behind in 1940, Pepsi’s liberal chief executive, Walter S. Mack, tried a new approach: he hired a team of 12 African-American men to create a “negro markets” department.

By the late 1940s, black sales representatives worked the Southern Black Belt and Northern black urban areas, black fashion models appeared in Pepsi ads in black publications, and special point-of-purchase displays appeared in stores patronized by African-Americans. The company hired Duke Ellington as a spokesman. Some employees even circulated racist public statements by Robert W. Woodruff, Coke’s president.

The campaign was so successful that many Americans began using a racial epithet to describe Pepsi. By 1950, fearing a backlash by white consumers, Pepsi had killed the program, but the image of Coke and Pepsi as “white” and “black” drinks lingered.

Not long after, perhaps seeing the business error of its ways, Coke quietly began to market to African-Americans. Eventually, part of Coke’s strategy was to support African-American organizations, forming the basis of its relationship with the N.A.A.C.P.

The historical weight of that relationship came to the surface after a 1999 discrimination case brought by black Coke employees, which created bad press for the company around the world. In 2000, Coke agreed to a settlement for $156 million and made a $50 million donation to the Coca-Cola Foundation to support community programs.

It took time, but the new tack worked: today the racial line between the soda companies, even in the South, is a dim memory, and the soft-drink industry is on good terms with one of its largest demographic markets: African-Americans.

Of course, the New York State N.A.A.C.P. may have a legitimate complaint against the soda restriction as a threat to minority business. And it may be fair to see the proposal, as some observers have intimated, as an instance of middle-class whites trying to control the behavior of working-class minorities – just as they did under Prohibition. But to understand the real story behind this unexpected alliance, we first have to understand its tangled history.

Grace Elizabeth Hale, a professor of history and American studies at the University of Virginia, is the author, most recently, of “A Nation of Outsiders: How the White Middle Class Fell in Love With Rebellion in Postwar America.”

The Financial Elite’s War Against the US Economy

Published on Monday, December 31, 2012 by Naked Capitalism

The Financial Elite’s War Against the US Economy

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.

Workers have become so deeply indebted on their home mortgages, credit cards and other bank debt that they fear to strike or even to complain about working conditions. Losing work means missing payments on their monthly bills, enabling banks to jack up interest rates to levels that used to be deemed usurious. So debt peonage and unemployment loom on top of the wage slavery that was the main focus of class warfare a century ago. And to cap matters, credit-card bank lobbyists have rewritten the bankruptcy laws to curtail debtor rights, and the referees appointed to adjudicate disputes brought by debtors and consumers are subject to veto from the banks and businesses that are mainly responsible for inflicting injury.

The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society. In contrast to the promise of democratic reform nurturing a middle class a century ago, we are witnessing a regression to a world of special privilege in which one must inherit wealth in order to avoid debt and job dependency.

The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyone’s taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. This Big Lie is used to reverse the concept of progressive taxation, turning the tax system into a ploy of the financial sector to levy tribute on the economy at large.

Financial lobbyists quickly discovered that the easiest ploy to shift the cost of social programs onto labor is to conceal new taxes as user fees, using the proceeds to cut taxes for the elite 1%. This fiscal sleight-of-hand was the aim of the 1983 Greenspan Commission. It confused people into thinking that government budgets are like family budgets, concealing the fact that governments can finance their spending by creating their own money. They do not have to borrow, or even to tax (at least, not tax mainly the 99%).

The Greenspan tax shift played on the fact that most people see the need to save for their own retirement. The carefully crafted and well-subsidized deception at work is that Social Security requires a similar pre-funding – by raising wage withholding. The trick is to convince wage earners it is fair to tax them more to pay for government social spending, yet not also to ask the banking sector to pay similar a user fee to pre-save for the next time it itself will need bailouts to cover its losses. Also asymmetrical is the fact that nobody suggests that the government set up a fund to pay for future wars, so that future adventures such as Iraq or Afghanistan will not “run a deficit” to burden the budget. So the first deception is to treat only Social Security and medical care as user fees. The second is to aggravate matters by insisting that such fees be paid long in advance, by pre-saving.

There is no inherent need to single out any particular area of public spending as causing a budget deficit if it is not pre-funded. It is a travesty of progressive tax policy to only oblige workers whose wages are less than (at present) $105,000 to pay this FICA wage withholding, exempting higher earnings, capital gains, rental income and profits. The raison d’être for taxing the 99% for Social Security and Medicare is simply to avoid taxing wealth, by falling on low wage income at a much higher rate than that of the wealthy. This is not how the original U.S. income tax was created at its inception in 1913. During its early years only the wealthiest 1% of the population had to file a return. There were few loopholes, and capital gains were taxed at the same rate as earned income.

By not raising taxes on the wealthy or using the central bank to monetize spending on anything except bailing out the banks and subsidizing the financial sector, the government follows a pro-creditor policy. Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default.

The government’s seashore insurance program, for instance, recently incurred a $1 trillion liability to rebuild the private beaches and homes that Hurricane Sandy washed out. Why should this insurance subsidy at below-commercial rates for the wealthy minority who live in this scenic high-risk property be treated as normal spending, but not Social Security? Why save in advance by a special wage tax to pay for these programs that benefit the general population, but not levy a similar “user fee” tax to pay for flood insurance for beachfront homes or war? And while we are at it, why not save another $13 trillion in advance to pay for the next bailout of Wall Street when debt deflation causes another crisis to drain the budget?

But on whom should we levy these taxes? To impose user fees for the beachfront reconstruction would require a tax falling mainly on the wealthy owners of such properties. Their dominant role in funding the election campaigns of the Congressmen and Senators who draw up the tax code suggests why they are able to avoid prepaying for the cost of rebuilding their seashore property. Such taxation is only for wage earners on their retirement income, not the 1% on their own vacation and retirement homes.

By not raising taxes on the wealthy or using the central bank to monetize spending on anything except bailing out the banks and subsidizing the financial sector, the government follows a pro-creditor policy. Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets – in this case the public domain as if it were the family silver, as Britain’s Prime Minister Harold MacMillan characterized Margaret Thatcher’s privatization sell-offs.

In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected. The International Monetary Fund (IMF), European Central Bank (ECB) and EU bureaucracy treat governments like banks treat homeowners unable to pay their mortgage: by foreclosing. Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.

Sovereign governments are, in principle, free of such pressure. That is what makes them sovereign. They are not obliged to settle public debts and budget deficits by asset selloffs. They do not need to borrow more domestic currency; they can create it. This self-financing keeps the national patrimony in public hands rather than turning assets over to private buyers, or having to borrow from banks and bondholders.

© 2012 Naked Capitalism
Michael Hudson

 

 

Michael Hudson is a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “The Bubble and Beyond.”