Posts Tagged ‘Second Great Depression’

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I’m still recovering from the long weekend driving to and from New Harmony, for the conference on Capitalism & Socialism: Utopia, Globalization, and Revolution, where I presented a plenary talk on “Utopia and the Marxian Critique of Political Economy.”

Here, for those who are interested, is a link [pdf] to the text of my presentation.


The third part of “Children of the Recession,” UNICEF’s report on “the impact of the economic crisis on child well-being in rich countries,” focuses on Gallup Poll data about people’s experiences and perceptions of the most recent crisis of capitalism.*

In 18 of the 41 countries, three or more of these indicators reveal rising feelings of insecurity and stress from 2007 to 2013. The most severely affected countries—including the United States—are clustered at the bottom of the table.

In terms of its impact on personal experiences and perceptions, the Second Great Depression is certainly not over. In 13 countries—again, including the United States—negative responses to three or four questions were still rising between 2011 and 2013, particularly in countries such as Cyprus, Greece, Ireland, Israel, the Netherlands, Spain and Turkey.


*Due to data availability, the numbers in the table refer to the population in general, not to families with children. Countries are ranked based on their average score across the four indicators, each of which measures how responses changed between 2007 and 2013. The highest number indicates the sharpest change. Column 5 indicates how many of the responses to the four were negative over the full period.


According to a recent survey commissioned by CNBC/Burson-Marsteller, corporations are facing a global legitimation crisis.

The vast majority of citizens—both the general population and business executives, in the United States and around the world—believe that governments are more on the side of corporations than of average citizens.


“Greed” is the first thing that comes to mind when the general public think of corporations. And the first thing for business executives? “Big business.”


What’s interesting is the degree of overlap between the two word clouds.

Clearly, in the midst of the Second Great Depression, corporations are facing negative perceptions on the part of both the general public and business executives in terms of the influence they have over governments and what they stand for.

It’s about time, then, to think of new ways of organizing the enterprises that play such a large role in people’s economic, political, and social lives.


Of course, there’s a bidding war for Family Dollar Stores, one of the country’s biggest deep-discount retailers!

According to Richard W. Dreiling, Dollar General’s chairman and chief executive,

“It’s fair to say that the economy is creating more of our core customers,” he said. “The middle-income customer is getting squeezed.”

Dreiling’s view is confirmed by the latest report on household income trends from Sentier Research [pdf]. Their Household Income Index shows the value of real median annual household income in any given month as a percent of the base value at the beginning of the last decade (January 2000 = 100.0 percent). As readers can see in the chart above (red line), the index for June 2014 stood at 94.1 compared to 98.8 in December 2007, when the “great recession” began, and 97.0 in June 2009, when the “economic recovery” supposedly began. The index had increased unevely from August 2011 (the low point) to this summer.

What does it mean? In short, it means that average American households have been beaten down—and therefore have been forced to pinch pennies by purchasing at discount retail stores like Family Dollar, Dollar Tree, and Dollar General—and that their incomes, while far below their peak, have in fact been rising over the last few years—which means they are able to spend more of their pennies at those same discount retailers.

Clearly, as I’ve argued before, “there’s a lot of profit to be made in selling discount commodities to the low-income and falling-income American families whose numbers have grown over the course of the past three decades, and especially in the midst of the Second Great Depression.”

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It has become part of the liberal common sense in the United States (buttressed by the publication of Thomas Piketty’s Capital in the Twenty-First Century) that rising inequality is a top priority, with little discussion of poverty. Conservatives, of course, are pushing back—with the argument (currently being peddled by Deirdre McCloskey, basically a more libertarian version of the argument that more conventionally conservative Martin Feldstein was making in the late-1990s) that we really should be worried about poverty, and forget about inequality.

They’re both wrong. Poverty and inequality are, in fact, connected—both in the long term and in the short term. They’re connected in the long term in the sense that the period of rising inequality, beginning in the late 1970s (measured, as above, by the income share going to the top 1 percent) is also the period during which the poverty rate stopped declining and the number of Americans living below the poverty began a dramatic increase (reaching 46.5 million in 2012).

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And, in the short term, we can see that the “recovery” that has been engineered to the benefit of those at the very top (again, measured in terms of the share of income going to the top 1 percent) has been accompanied by a dramatic growth in poverty (as measured in both monthly and annual rates).

Clearly, we can’t afford to choose between poverty and inequality. Current economic policies and arrangements, as they have been implemented since the mid-1970s and kept intact in the midst of the Second Great Depression, have led to growing inequality and consigned a growing segment of the population to living in conditions of poverty. Long live the rich, and to hell with the poor! Is it really so difficult to understand the following proposition: a society that lets a tiny elite capture an obscene portion of its income and wealth is also prone to force a large portion of its citizenry to try to survive in conditions of abject poverty?

Fundamentally changing the economic policies and arrangements of such a society—for example, by changing the way the surplus is appropriated and distributed—can serve to eliminate grotesque levels of inequality and, at the same time, the enduring legacy of massive poverty.


After more than thirty years of rising inequality, and in the midst of the Second Great Depression, the financial situation of many U.S. households is dire.

That’s my interpretation of the results of the Federal Reserve’s latest report on the economic well-being of American households.

Here are some of the facts contained in the report:

Overall, only 30 percent of the respondents considered themselves to be better off financially than they were in 2008.

In terms of credit-card debt, only 57 percent of respondents reported that they pay off their balances in full each month. (Among the remaining 43 percent who revolve their credit card balances, 82 percent had been charged interest on their balance at some time in the prior 12 months.)

The median percentage of 2102 income reported saved was only 2 percent (the mean was much higher, 9 percent), while 45 percent of respondents reported that they were not able to save any portion of their income in 2012.

Respondents were asked how they would pay for an emergency expense that came along and cost $400. The majority responded that covering such an expense would be a challenge: 19 percent indicated that they simply could not cover the expense; 9 percent would have to sell something; or would have to rely on one or more means of borrowing to pay for at least part of the expense, including paying with a credit card that they pay off over time (17 percent), borrowing from friends or family (12 percent), or using a payday loan (4 percent).

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24 percent of respondents have education debt for themselves, someone else (spouse, child, or grandchild), or a combination of the two. Among those with each type of education debt, the average amount people reported owing for their own education was $25,750, with a median value of $13,000. Overall, 37 percent of respondents said that the financial costs of education outweighed the benefits. Those who did not complete their program of study were far more likely (56.5 percent) than others (38 percent for those who completed programs, 17 percent for those still enrolled) to say that the financial benefits of their education were much smaller than the cost.

When asked if they could afford to cover the cost of a major out-of-pocket medical expense, 43 percent of all respondents said that it was not likely that they could afford to pay. Only 21 percent of respondents indicated that it was very likely they could afford to pay for a major out-of-pocket medical expense. In fact, almost a quarter of respondents experienced what they described as a major unexpected medical expense that they had to pay out of pocket in the prior 12 months. The result? One quarter of respondents went without dental care in the prior 12 months because they could not afford it, 18 percent went without a doctor visit, 15 percent went without prescription medicine, 11 percent went without a visit to a specialist, and 10 percent went without follow-up care. Overall, 34 percent of respondents reported going without at least one of these types of care because they could not afford it.


Finally, 23 percent of Americans who are near retirement age (ages 45 to 59) have zero money saved. So, what are they planning to do? Basically, rely on Social Security benefits (58 percent), continue working (25 percent), and/or expect their spouse/partner to keep working (11 percent). Not surprisingly, people’s expectations depend on their level of income:

Responses to the question about the path to retirement also vary consistently by income, indicating that expectations around retirement are closely linked to financial circumstances. While 35 percent of those earning six figures reported that they intend to work full time until a retirement date and then stop working, only 15 percent of those earning less than $25,000 intend to do so. Similarly, 28 percent of those earning less than $25,000 indicated that they expect to “keep working as long as possible,” while only 13 percent of those earning $100,000 or more said the same.

The bottom line: a very large group of Americans are financially on the edge. They’re broke and getting broker.


Right now, mainstream economists are both congratulating themselves and bemoaning their fate.

Mainstream economists (such as Justin Wolfers and Paul Krugman) are congratulating themselves for having achieved a virtual consensus on the positive effects of fiscal stimulus. But they’re also complaining about the fact that the rest of the world (such as politicians, central bankers, and others) doesn’t seem to be listening to their expert advice.

Just two quick comments on this approach to consensual economics:

First, of course there’s a consensus among mainstream economics! That’s what their theories and models are supposed to do: produce and reproduce a consensus in terms of the basic analysis of macroeconomic events (although, of course, there can still be disagreements about particular aspects, such as the exact size of the fiscal multiplier and so on). And anyone who doesn’t use those models, and therefore reaches a different set of conclusions, is declared to be outside the mainstream, and therefore not worth reading or being listened to.

Second, how is it possible to declare—in the midst of the Second Great Depression—that mainstream economics has been an unqualified success? To arrive at such a conclusion would mean to overlook, at a minimum, the role that mainstream economics played in creating the conditions for the crash of 2007-08, in failing to include even the possibility of such a crash in their models, and in confining themselves to a package of monetary and fiscal policy measures—and not to even consider the possibility of larger, structural changes—as tens of millions of people lost their jobs, were stripped of their wealth, and were pushed further and further down the economic ladder.

Those engaged in consensual economics are, it seems, too busy congratulating themselves and bemoaning their fate to want to recognize the gorilla in the room.