Tuesday, August 23, 2011

Americans Are Lazy and Spoiled And The Recession Was A Good Thing

Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About ItPinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It by Don Peck

If you put our current economic problems into a historical context, you might conclude that we are simply in a valley in the up and down economic cycle. Huge economic downturns simply happen about every 40 years and generally follow some kind of economic boom. Over the last 150 years this pattern has been pretty clear.
The economic boom of the The Industrial Age in the last half of the 19th century for instance preceeded the economic calamity of the 1890s. Then while there was a second industrial boom in the early 20th century it famously came crashing down in 1929 sending our nation spiraling into a Great depression that greatly transformed our country.  Our nation tried to claw its way out from that valley through New Deal socialistic mechanisms, from reconstruction packages to social security and so forth.  But real recovery didn't come until a new "boom" came. This time it was in the form of a gignormous military boom. America rapidly saw the military industrial-complex grow to maturity during our involvement in World War II and then the Cold War. This boom had a lot of steam and didnt start to fizzle until the Seventies (largely due to the fact that the military-industrial complex was wedded to the oil industry).  America suffered greatly with the energy crisis of the early 1970s and the end of the Vietnam War as we began waiting around for the next boom

At that point, in the mid Seventies, America couldn't seem to get its economic gears turning. Jimmy Carter touted a solution of thinking green, recycling, reducing usage, etc.  But the economy continued to suffer until the early/mid 1980s when the next boom was just starting to get its legs: the technology and information boom that provided a generation with a supply of new gadgets in the form of Sony walkmans, personal computers, consul games, cable televison, compact discs, VCRs, etc. Meanwhile Ronald Reagan was increasing government spending in historical amounts mainly through attempts to re-start the miliary boom of years gone by.  Unfortunetely this was largely done through the funding of covert wars and the institutionalization of huge pay-outs to corporate defense contractors.

As the Information and Technology Boom continued to snowball into the late 1980s, the Cold War began to lose its pulse. Bush Sr decided to give the military-industrial complex yet another shot in the arm by going to war with Iraq--a war which the US won overwhelmingly. The war was over quickly and Bush Sr was now married to a post WWII military boom that seemed outdated. Again America was looking toward the future and as Bill Clinton took over the white house he was right in time for the Information and Technology boom to become full blown. But another boom was building as well, the Housing boom--largely the creation of America's addiction to credit that started with the open-market, deregulation policies of Reaganomics (which actually made the Housing boom just a huge illusion that would lead to a crash).
The Housing/Real Estate crash is one of the main causes to what Pinched's author Don Peck is calling The Great Recession. There were other large factors of course like Bush Jr's unfunded War for Oil in the Middle East and free-trade agreements that allowed the outsourcing of American jobs to China/India. Also there was the extreme profit-driven take-over of the health care/drug system and of our educational system (all of which stems from the systemic problem of the Corporatization of America's economic-political system).   These factors all lead to the grim statistics that Peck lays out in the early part of his book. During the final year of the Bush Administration, for instance, from 2008 until June of 2009 the US economy shrank by 4 percent. More than 8 million Americans lost their jobs. The average house fell 30% in value and the typical household lost a quarter of its worth. The Dow lost 7,000 points and 165 commercial banks failed. Peck also points out that by 2010, 55% of American workers had experienced job loss in some form, either from actually losing their job, getting less hours, getting a pay-cut or loss of beneits. And on top of that, the people that were losing their jobs, had a longer duration until they found another job than any other time since the Bureau of Labor Statistics started tracking that figure in 1948.

After pointing out these grim statistics, Peck goes into some specifics as to how this Great Recession has transformed America. He points out that it has widen the gap between the rich and the poor to a greater extent than ever before. Also, it has specifically crippled cities that had been falsely propped up by the housing and credit booms - cities like Phoenix, Tampa, Las Vegas. Also the Great Recession has shifted the demographics of the workforce from a majority of men to a majority of women. He also covers stats that express a change in attitudes toward Americas policies when it comes to giving government aid to the poor (support has dropped from a 54% to 48% from 2007 to 2010) while support for free trade has also dropped (53% of Americans thought it was harmful in 2010 whereas 46% thought so in 2007).

dazed and confused Pictures, Images and Photos
Perhaps the deepest effect The Great Recession has had is that, according to Peck, it has deflated and depressed the spirit of the America people (a study sponsored by Rutgers university found that for every 100 people who went without a job for 7 months or more: 63 were suffering from sleep loss, 46 were more likely to lose their temper quicker, 14 developed a substance dependency and the majority of them have strained relations with their family and have begun avoiding social encounters with friends and acquaintances). This depression of the American pscyhe largely parallels the deflated spirit of the American people during the crisis-ridden Seventies when  Americans were waiting around for the next boom (which turned out to be the information and communication boom) to happpen.

So what do we do in the meantime? While we wait for the next great boom? And what if there isn't going to be a next great boom? What if things have steadied into a slow, level, small, incrimental evolution?

Peck admits that he doesnt know the answers, but after researching the subject thouroughly he is at liberty to give his opinion, so he freely points out some remedies in the final chapter: "A Way Forward" in which he throws out a large number of remedies (be forewarned some seem pretty weak and all of them call for Big Government). Here are some of these ideas:

~Aggressive deficit cuts that contain triggers that could lead to across the board spending cuts and tax increases

~Medicare overhaul that would include vouchers for seniors

~More stimuli that includes targeted aid to states, especially for infrastructure projects.

~An end to policies that encourage home ownership (thereby encouraging renting)

~Government aid to people who want to relocate or retrain for jobs

~A multi-bllion dollar Governemnt assistance program for people who lost their job and have to take a lower paying job

~Aid to employers who hire people who have been unemployed for two-years or more.

~Increased Federal investment (possibly to include a National Innovation Bank) and large tax breaks for Scientific/technological research and development

~Massive deregulation (laxing the Sarbanes-Oxley reforms)

~Increased government spening on education

~Implement a fair exchange rate, particularly with China

Overall, Pinched has a lot of relevent research (lots of good statistics but with some ho-hum anecdotal evidence thrown in as well) and reinvorces many points worth keeping in mind. Pinched makes for a fairly accurate historical record of the Great Recession, but beyond that don't expect anything new or exciting in Peck's analysis or perspective.  His solutions relied heavily on Big Government spending at a time when nothing could be less popular.  But let's face it, in the absence of some miraculous technological boom, Big Government spending is what has gotten this country out of every other recession we've ever had.

For these reasons and more I give Pinched a 2.5 out of 5 WagemannHeads.
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