In 2007, at the start of the Second Great Depression, 26.3 million Americans—8.7 percent of the population—were on the Supplemental Nutrition Assistance Program (SNAP). Today, that number has risen to 47.6 million, which means that 15 percent of the U.S. population is receiving food-stamp benefits.
What’s that you say about a recovery?
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Special mention
It’s really not all that hard to explain why real wages for American workers are stagnant—basically what they were back in December 2005.
The year over year change in hourly wages fell to 1.1 percent in October, which means that workers’ wages are not even close to keeping up with inflation.*
So, how do we explain the fact that real wages have remained flat in the midst of the current recovery?
“To me, it’s very simple. There is just such a massive amount of slack in the labor market. You are getting less incrementally in earning power for each job created . . . that’s across the board, across industries,” Dutta said.
That’s a fancy way of saying that with so many Americans out of work or looking for better jobs, employers have the upper hand.
“This is a very depressed labor market. . . . When you have that many people competing for every job that’s available, it’s going to keep wages” flat, Dutta said.
As I said, it ain’t rocket science!
*For example, according to the Bureau of Labor Statistics, the average wage of production and nonsupervisory employees on private nonfarm payrolls was $19.79 in October 2012, compared to $19.57 in October 2011—an increase of only 1.1 percent in nominal terms. If it had just kept up with the rate of inflation for that one year, the hourly wage would have been $19.99.
This is what recovery looks like during the Second Great Depression!
The current “recovery” is the worst, by almost every measure, since the First Great Depression—but it’s the best in one sense: corporate profits.
Actually, according to Catherine Rampell, there are economic recoveries (especially the short-lived recovery beginning in July 1980) that, at least on one or another measure, are worse than the present one. But the current recovery is worse than the “typical” postwar economic recovery on almost every measure: GDP growth, consumer spending, private residential investment, private nonresidential investment, equipment and software, exports, imports, government spending, and payrolls.
The only major metric I looked at wherein today’s recovery outperformed the average expansion of the previous 60 years was corporate profits.
In the average postwar recovery, corporate profits rose 38 percent from trough to peak. So far into this recovery, they have risen 45 percent.
That is not the largest increase of any postwar expansion, as the recoveries that lasted from November 1982 to July 1990 and from November 2001 through December 2007 both saw corporate profits increase by more than 60 percent. That record for the current recovery is still quite impressive, though, especially given how poor the job market still is.
In fact, the total level of corporate profits reached an all-time high, even after adjusting for inflation, in the last quarter of 2011, despite the fact that unemployment averaged 8.7 percent that quarter.
And that’s the main reason we’re still in the Second Great Depression: it is the worst of times (for most people, on most measures), it is the best of times (for corporate profits).
Special mention
After three decades of growing inequality, leading up to the crash of 2007-08, and in the midst of the Second Great Depression, what’s the path to recovery?
Stewart Lansley, in part 3 of his series, argues that we need to limit the level of inequality in order to create a viable recovery.
There has been much talk about the need to tackle growing inequality, but little real action. Ending the present crisis and building a sustainable global economy requires a much more fundamental leap that accepts that there is a limit to the level of inequality – one that is still being breached in a majority of nations – that is consistent with stability.
The successful management of economies depends especially on securing a more equal distribution of market incomes, before the application of taxes and benefits. Tackling the unequal “pre-distribution” of incomes means elected governments taking more responsibility for both the distribution of factor shares and of relative levels of pay. . .
National governments need to develop a new contract with labour that raises the wage floor, bolsters the middle and lowers the ceiling. This means the taming of excessive corporate power and a rebalancing of bargaining power in favour of the workforce. It means moving towards more progressive tax regimes with much tougher global action on tax havens.
While I’m sympathetic to Lansley’s approach, I think he limits the options unnecessarily. I’m all in favor of more equality but why is the choice only between the “faulty theory” of the recent past and what is in effect an attempt to recreate the less unequalizing form of capitalism of the postwar period? If the problem (which he identified in the first two parts of the series) is the tradeoff between “factor shares”—such that the growth in the share accruing to capital comes at the expense of the share going to labor—why not then eliminate the class conditions of that conflict?
In other words, the option Lansley leaves off the table is to move beyond capitalism, by allowing those who actually produce the surplus to appropriate and distribute it. Making that one change in society would eliminate the kind of instability Lansley correctly identifies as one of the key causes of the crash and subsequent depression. It would go a long way toward, in his words, “ending the present crisis and building a sustainable global economy.”
Let’s call this a new New Deal, a fundamental change in the way the economy is organized appropriate for the twenty-first century.
According to a new study [pdf] by Gordon W. Green Jr. and John F. Coder, former officials at the U.S. Census Bureau,
- Real median annual household income has fallen significantly more during the economic recovery period from June 2009 to June 2011 than during the recession lasting from December 2007 to June 2009.
- During the recession, real median annual household income fell by 3.2 percent, from $55,309 in December 2007 to $53,518 in June 2009. During the economic recovery, real median annual household income fell by an additional 6.7 percent, from $53,518 in June 2009 to $49,909 in June 2011.
- For the entire period from December 2007 to June 2011, real median annual household income has declined by 9.8 percent. A decline of this magnitude represents a significant reduction in the American standard of living.
The so-called recovery is, in fact, the Second Great Depression.
