We have grown weary of hearing about how our economy is improving, how the recession ended months ago and how we are going to “grow our way out” of economic hardship. We are equally weary of dire predictions of imminent economic and social collapse. These are half truths and political expediencies. The truth, as usual, is somewhere in the middle of the extremes.
A quick look at the numbers this week should make the case. Numbers can be used for deception when they are overlaid by punditry, but taken in undiluted doses they can bring us closer to the truth than most of the popular interpretations now being used to sell soap on television. Here we go, and hold onto your hats:
The number of people on food stamps is now approximately 43.2 million – an all time high at 14 percent of the population. The U.S. Conference of mayors reports that visits to soup kitchens are up 24 percent this year and there are over 643,000 people seeking shelter in cities every night. The number of people on unemployment has dropped to 9.4 percent – because so many people have dropped out of the system completely. The percentage of working age men over 20 has dropped to 73.6, the lowest rate since this data began being collected in 1948. The percentage of unemployed who have been out of work for over six months now stands at 42 percent, a number we haven’t seen since World War II. Finally, the Gini coefficient, which is used to measure income inequality, has grown to 46.8 percent – a number we have not seen since the “Roaring Twenties,” right before the Great Depression.
Former Labor Secretary, Robert Reich, succinctly tells the rest of the story: “Corporate America is in a V-shaped recovery. That’s great news for investors whose savings are mainly in stocks and bonds, and for executives and Wall Street traders. But most American workers are trapped in an L-shaped recovery.”
The student of history and economics may note that the Gini coefficient is a good predictor of social unrest. If we connect the dots we see that bank failures in the Great Depression were due, in part, to the expansion of credit to struggling farmers which was a political solution to the Populist movement of that era. As we have observed before, when history does not repeat itself, it often rhymes. The expansion of sub-prime credit of recent memory, whether or not it was a conscious effort to “buy off the poor,” has contributed to a dynamic similar to that seen just before the crash of 1929. What is different this time around is the extent to which Globalization has contributed to the declining fortunes of half our population. Moving production to cheap labor countries has helped inflate corporate profits to all time highs, but it has trapped more and more people on the wrong side of the prosperity divide.
We do not know what solutions may be effective in addressing our current economic and potential social problems, but solutions to address our wounds are unlikely to be found in speeches and in the Band-Aids of symbolic legislation which Congresses passes to sustain the illusion that they are doing real work. Our system is out of balance and in need of correction, and to borrow a phrase from economist, Bill Bonner, we are in the midst of a "Great Correction.” We do not believe our current government has the wherewithal to, by way of example, “pull off the Band-Aid” all at once. Instead we foresee a slow, painful, “hair by hair” removal.
