A guest poster at naked capitalism puts forth the case that the present economic downturn is more severe than the Great Depression of the 1930s:
So even though the government’s spending on the “war†on the economic crisis dwarfs the amount spent on the New Deal, our economy is still stuck in the mud.
Given that the government has done so much, but we are still mired in a situation which in many ways is comparable to the Great Depression, it is not a very radical statement to say that the government is doing the wrong things to address the downturn.
I can’t honestly say whether the situation today is better, worse, or about the same as the Depression of the 1930s. I wasn’t there. Many of the things I’m seeing around me are eerily reminiscent of what I’ve heard about that period. For example, after graduating from law school my dad couldn’t get a job as a lawyer until several years after he’d passed the bar. Unpaid internships (which benefit the wealthy) were a commonplace way of getting your foot in the door.
I don’t think we can blame the actions of the last couple of years or even the last decade for the fix we’re in. We’ve been making this bed for the better part of the last forty years.
Read the whole thing. Pretty chilling stuff.
The “1 in 7 on foodstamps” number shocks me.
As you may recall, I’ve been highlighting it in comments as the number worsened. Jeez louise. 1 in 7.
From 2000 through 2006 food stamp enrollment increased sharply even as participation in other forms of assistance declined. But you’re right, it is a shocking number.
And certainly the oft-made argument that this Great Recession would have a very different “visual” if those same folk were lined up at food banks or soup kitchens is true.
And yet, GDP only declined about 3.5% from peak to trough on a trailing 4 quarter basis. Nominal GDP is now making new all time highs. Corporate profit margins are 50% above “average” levels due to a surge in productivity unlike anything ever experienced. All that explains the phenomenal performance of the stock market.
The surge in productivity has produced a monumental jobs crisis. If we could magically figure out how to make most of the people unemployed productive again, we would be experiencing a golden age of prosperity. But that won’t happen because many of the unemployed have outdated skills that make them uncompetitive hires. It could take a decade or more of intense venture capital investment COMBINED with a determined effort to train college graduates with the skills that make them employable in the new businesses created by the venture capitaliststs to begin to make a dent in the excess labor in the economy. That’s tragic.
I think you’ve misdiagnosed the situation, Scott. The “missing” labor in the improved “productivity” is in China.
Consider the iPhone and Apple’s phenomenal returns. To calculate Apple’s productivity you divide profits by US employees, yes?
(That is, no amount of training is going to make US workers cheaper than Foxconn. Robotics might compete, but that wouldn’t bring the jobs back either.)
It bears mentioning that China is experiencing substantial unemployment among its college grads, too. There isn’t just one problem but multiple, among them being that we’re not creating enough jobs for people to do, regardless of what their training is and we’re capping the number of people being trained for the jobs that are most in demand.
States and the federal government have been expanding food stamp eligibility, so it’s not a static measure. And activist groups have been trying to sign-up people for food stamps to de-stigmatize the program.
Warning: Just returned from traffic court, I belive local communities are finding new ways to raise revenue. Ouch.
I asked, back when food stamp usage was only 1 in 10 or something, if the problem was genuine poverty or loose criteria.
If someone can show loose criteria, then yeah you can blame aggressive recruitment.
If not, not so much.
jp, if you click through the links to the source of the one in seven, you’ll see the article says this:
“But it’s not just the nation’s stubbornly high unemployment rate of 9.8% that’s driving the increase in food stamp use. Some states are expanding their definitions of poverty to include more people.
At the same time, the 2009 American Recovery and Reinvestment Act boosted annual funding to the nationwide food stamp program, known as the Supplemental Nutrition Assistance Program, by $10 billion.
[snip]
The U.S. government considers food stamps to be effective stimulus for the economy, because the recipients usually spend them right away.”
Also, see this link:
http://www.cbpp.org/cms/index.cfm?fa=view&id=2226
The graph on participation levels supports Dave’s point that participation rates have been increasing prior to the recession. I believe this is because interests groups have been attempting to destigmatize the program with promotional campaigns.
I really don’t have a beef about food stamps, it’s just that there are a lot of factors in play with it’s increased usage.
And frankly the Naked Captilism post made a lot of comparisons that simply raised my suspicions in general. I simply think it’s hard to compare the 1930s economy with today.
This is why I’ve pressed in the past (without success) for someone to say that people need to be kicked off food stamp. Either we have a problem with widespread poverty, or we have free food for people who don’t need it.
Just citing “expanding definitions” doesn’t answer that.
FWIW, I see at your link:
With $17K of that going to rent for just a two bedroom apartment, not much is left.
There was a story in the papers today about the continued rise of multi-generational households. That ties in as well.
I’m aware that Naked Captilism is going to come at this from a lefty perspective, but in this case I think there is both smoke and fire.
I think comparisons to the 30’s are overwrought because we have a social safety net in place, and because we start from such a position of wealth to begin with.
If we experienced truly shocking, amazing, incredible levels of decline over a period of many years we’d be . . . Italy in 2010. Not an Oklahoma hobo jungle in 1932.
As for jobs I know this isn’t properly phrased, but is it possible we’ve reached the point where, 1) We have all the stuff we need and want, 2) It doesn’t take all of us working to create all the stuff we need and want, so, 3) This isn’t so much a bug as a feature of an economy moving into a new, long-term phase?
On a more psychological, philosophical level, is it possible we’ve finally absorbed the reality of the diminishing returns of materialism? You know what the difference is between a $250 room at Sofitel Chicago, and a $600 room at the Ritz-Carlton Water Tower Place? Maybe 50 bucks in actual value. For which you pay $350.
The difference between a 50k Audi and a 25k Toyota? Aside from the fact that the Toyota is actually more reliable, there’s almost no difference in functionality or even comfort.
Maybe our future is fewer people work. Or people work less. I’m not sure that’s the end of the world.
This is nothing like the Great Depression. I had long talks with relatives who lived through it. My wife has an aunt in her 90s, sharp as can be, who willingly talks about it. Hunger was widespread, people actually died from hunger. People fought and killed over food. The hobos who wandered the country were not all benign. GDP dropped by (from memory) about 25%. People also forget about the dust bowl effect from the drought. Incidentally, the soil conservation efforts were a government lead initiative that worked quite well. Farmers were not rotating crops before the govt interceded.
Steve
It may be a proper distinction that the safety net stops the kind of horrors that michael and steve remind us of, but at the same time, the safety net hides what is real destruction to productive capacity.
Without unemployment, are you sure the 99’ers wouldn’t be facing a life-changing experience? (Maybe some are, but just in a “slower burn.”)
All this talk of state-subsidized food and people working less reminds me of 2nd century Rome.