"The parallels between the story of the origin of the Great Depression and that of our Long Slump are strong. Back then we were moving from agriculture to manufacturing. Today we are moving from manufacturing to a service economy. The decline in manufacturing jobs has been dramatic—from about a third of the workforce 60 years ago to less than a tenth of it today. The pace has quickened markedly during the past decade. There are two reasons for the decline. One is greater productivity—the same dynamic that revolutionized agriculture and forced a majority of American farmers to look for work elsewhere. The other is globalization, which has sent millions of jobs overseas, to low-wage countries or those that have been investing more in infrastructure or technology. (As Greenwald has pointed out, most of the job loss in the 1990s was related to productivity increases, not to globalization.) Whatever the specific cause, the inevitable result is precisely the same as it was 80 years ago: a decline in income and jobs. The millions of jobless former factory workers once employed in cities such as Youngstown and Birmingham and Gary and Detroit are the modern-day equivalent of the Depression’s doomed farmers.
The consequences for consumer spending, and for the fundamental health of the economy—not to mention the appalling human cost—are obvious, though we were able to ignore them for a while. For a time, the bubbles in the housing and lending markets concealed the problem by creating artificial demand, which in turn created jobs in the financial sector and in construction and elsewhere. The bubble even made workers forget that their incomes were declining. They savored the possibility of wealth beyond their dreams, as the value of their houses soared and the value of their pensions, invested in the stock market, seemed to be doing likewise. But the jobs were temporary, fueled on vapor."
Excerpt from an excellent, and brief, article in January's Vanity Fair. I think it's fantastic and worth your time to read.
(I am in the weeds...sorting my office and paperwork out and hope to not be AWOL much longer...)
3 comments:
I off to read that article - at last someone speaking sense! For years friends around me have continued to "invest" in the property market buying bigger and bigger houses on larger and larger mortgages. I kept saying "but a house is principally the place you live in first and foremost" We have been in the same house for 20 years, through hard work and some fortune we paid off our mortgage a while back. I was made redundant from a well paid job where I could have done as my friends did buy the ridiculous "mansion" in the private road with the "games room" etc. I have a job now that is paying half what I used to be paid. It is ok I can live on that and we have a home - a place I love, full of memories and hopefully still to witness some more stages in our lives as a family... my friends are... desperate in many cases - they have nothing "in the bank", a house they can't sell for even what it cost them, a huge mortgage and a realisation that in your late 40s, early 50s you are not as a attractive to an employer as someone in their 30s - whatever the law may say on ageism.
And where will the economy grow? Our daft govt seems to think banking and is pretty much forcing us out of the EU to preserve it's unregulated status. Hmm... the City of London still is considerably less than our manufacturing base, true wealth generation, and we export the vast majority of our manufactured goods to the EU... who we've just pissed off to keep the banks sweat... Frankly if you'd have written this as a book 10 years ago publishers would have laughed at the implausibility of it all....
Sorry - ranting! Again! :-)
I am sorry to hear about the state of housing market in England. For some reason I thought you all were too smart to be into the materialistic "big houses" and strange bank mortgages unregulated. I had hoped to imagine that england was more practical. I love that you have your house with its memories and hard earned comfort.
One of the biggest ptroblems in North America is that there are some backwards thinking peope (with power and money) who believe government shouldn't spend money. The thing is...we all suffer when the government doens't spend money. All the United States has to do is hire people to work on bridges, sweep sidewalks and shovel snow...and the housing market and economy would start to perk up. Add some spending on arts in school and medical insurance for everyone and this would be a country that can live.
I was pretty choked up when the writer of this article said the economy could suffer like this....al the young people more and more alienated...no spendng...frozen housing which means no construction or decor jobs...for another five-ten years.
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