Brave new economy:
My prediction, then? Not a V, not a U. But an X. This economy can’t get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.
The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can’t “recover” because it can’t go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.
The first comment slays me: “But we saved Wall Street! Didn’t we??”
We need a new James Howard Kunstler. The old one’s broken.
It amazes me that some people think the economy was actually good during the Bush administration… for most people it was at best flat. Unless you were in housing/real estate… but we all now how that worked out for everyone.
Shorter Reich: “The economy won’t get any better, and no one – including myself – has an answer for fixing things”
Merry X-mas to ME!
Read this yesterday via TPM. Disturbing yet spot-on. Tried to find a hole in his logic, but I couldn’t.
Depressing as hell.
Howard Kunstler? The only reason I know that name is because The Dude wanted his representation with the reactionary fascist police force of Malibu.
Also, Ron Kuby.
So I’m guessing he’s some sort of lawyer.
Whatever the new economy looks like, I will predict that health care reform will have to be a big part of it. With a public option a few things happen:
(1) people can start their own businesses or join small firms rather than stay with their big firm because it covers their health care
(2) people will have more money to spend because the overall costs of care will be lower
(3) rafts of people in the insurance industry will be free to use their skills in productive ways instead of skimming profits off of people’s health care dollars
(4) people won’t be so scared – I know at this point I am scared and we have good insurance through my DH’s company. We both have preexisting conditions now (like most middle aged people I bet) so if Kaiser ever quit covering us, we are in serious trouble. This is a background angst running all through the middle class.
I thought we were using “L” to describe a non-recovering recovery. Anyway, if the dollar were valued more reasonably then I would say he’s being overly pessimistic.
“So I’m guessing he’s some sort of lawyer.”
Go here and you’ll get a good idea of who Kunstler is:
Kunstler’s one of those guys who is one half visionary and one half kook. He foresaw a lot of the problems that we’re going through. His writings were banging the peak oil drum long before anyone else and he’s made some excellent points on the need to redevelop local economies and move away from the suburban, car-based culture.
But he’s also very ranty and has some kooky pecadillos – he’s pro torture to stop terrorists, believes that young people getting tattoos and listening to the rap music prove that they are lazy and useless, is oddly intolerant of the poor for someone preaching simplicity and has a way of veering into this odd not-quite-racism of the “minorities would be better off if they started acting just like white people” school.
I might get flamed for saying this, but IMO this isn’t that different from the kneejerk contrarianism Yglesias discussed yesterday. Reich admits that he doesn’t know what’s going to happen, so what is the point of this piece? Ok, so the economy won’t look exactly like it did a few years ago, but that’s not a particularly noteworthy observation. The economy is always evolving.
It’s the same with Kunstler. I like his stuff in general, but his chicken little schtick gets tiresome after a while.
I’m not trying to suggest that the economy is in great shape or anything, but I think reflexive doomsaying is counterproductive whether coming from the left or the right. (“America is going straight to hell because of the GAYZ!!!” “No, America is going to hell because peak oil!!!”)
The “jobless recovery” was the evidence that the economy had become a hollow shell. Huge profits at the top were not being supported by solid growth or business strength.
Now that shell is cracked and collapsed. You cannot rebuild “just” that shell. You have to go back to ground zero and start building the support first.
Bush was all about the shell, and was never anything else but surface appearance.
Obama… I’m still waiting to see where he goes with this. I’m optimistically hoping that the ground level planning that seems to be going on isn’t just more “shell building”
Did anyone see 30 Rock last night? It was the rerun where “Tracy Jordan” was on Larry King during an “Asian market crash.” Larry King asked him what he thought this meant for the future and he said it would be like the 70’s again where everyone was mean to each other. I think that’s probably right.
I think what you’ll see is a further divergence in income. People involved in professions that serve the global economy (finance, law, consulting, engineering, intellectual property etc) will continue to be decent. Everyone else will suffer and will have to accept life in smaller houses, one car (not three) cars, cheaper clothes, etc.
Kunstler’s a windbag corvid wannabe. But see also.
“I’m not trying to suggest that the economy is in great shape or anything, but I think reflexive doomsaying is counterproductive whether coming from the left or the right. (“America is going straight to hell because of the GAYZ” “No, America is going to hell because peak oil“)”
The difference is that American really could go straight to hell because of peak oil. When the International Energy Agency starts to publicly worry about something, it’s moved from the kook file.
Between the rants, Kunstler does make the point that many of the changes needed to address an energy supply crisis could actually improve the overall quality of life. With better long-term planning, directed research and smart leadership, we could come out of this better off than we are now.
Which, knowing our national leadership culture, means that we are all fucking doomed.
What will the new economy look like? It will look just like the old one only there will be less of it. Remember those families whom you used to feel sorry for? The ones where mom, dad, and the twenty-something-year-old kid all had two shit jobs? You know: the people who drove crappy old cars and always rented? Excepting the bankers, stock brokers and doctors, that’s most of us going forward.
Console yourself with the fact that AIG and Goldman Sachs are paying out $600K bonuses and get the fuck back to work.
Is point is so painfully obvious that I don’t know how anyone could seriously dispute it.
Montysano (All Hail Marx & Lennon)
IOW, Vonnegut’s “Player Piano” come to life? Swell.
I’m a weekly Kunstler reader, as well as having read “The Long Emergency” and his novel “World Made By Hand”.
That’s about right. But in his writings about the house of cards that we’ve constructed, and how it will fall, he has been remarkably prescient.
I’m somehow reminded of the documentary Man on Wire.
Thanks. I think I have an idea what Kunstler (or at least Kunstlerites) sound like… Ezra Klein must be an acolyte.
Peak oil is a scary, scary proposition made more so when combined with global climate change (ironically brought about by massive consumption of fossilized sunlight).
Think about having 250 million Bangladeshis unable to feed themselves because their rice fields are now underwater and the US grains (assuming climate change doesn’t wreak havoc with drought in the midwest) costing more because diesel is $15/GLN and half the crop is used to generate bio-diesel for farms and ethanol for the commuters. I’m sure India and Pakistan will welcome these migrants with open arms and a bowl of soup.
Ok, so the economy won’t look exactly like it did a few years ago, but that’s not a particularly noteworthy observation.
When policy makers are anticipating that it will be, it is a noteworthy observation.
Reich is right, the future economy is going to be a whole lot different than the one we just enjoyed. There is no middle class like the one that ran America after WWII. There is no massive reservoir of highly portable and energy-dense fuel just waiting to be pumped from the ground for pennies. There is no industrial base in America like the one that fed the middle class. The economy of the last decade was fueled by cheap credit and cheaper consumer goods manufactured by peasants in China.
Paul Krugman pointed out in his blog last week that Malthus was right for every century up to his own: all technological advances went to growing the population, and none went to improving our lot in life. The standard of living had not gone up for most people, or in general.
When I see these kinds of speculation, “A new economy! What will it look like?”, I get the horrible suspicion that we’re going back to Malthus, with quality of life improving only for the wealthiest, and either staying steady or deteriorating for the rest of us.
I’ve always been an optimist.
@Emma Anne: What she said. I know that even when I was employed (I’m euphemistically between jobs right now) my wife was afraid of striking out on her own b/c she’d lose her healthcare coverage (yes, we could add her to mine, but we all see how that would have worked out).
The fact that the “small business lobby” has its head so far up the GOPs ass that they think lobbying against healthcare reform is the way to go is fucking mind-boggling.
At any rate, I’m not a doom-and-gloomer (i.e. America now entering period of terminal decline), but I think Reich is right. The V or U shaped recession is far less likely than the “L” (or hockey-stick). Consumers still have a mountain of debt, income/wages are stagnant or falling and easy credit/debt (which can mask the former) are gone. Consumer RE is still crashing. Heck, residential RE will crash for years to come or remain flat (another thing that, when rising, masks the lack of income growth). 9-10 years of job growth have been wiped out (and rising), while population is still growing. And the jobs that are coming about pay less than the ones that were gone (broadly speaking). Add it all up and it’s not a recipe for robust economic recovery. Remember the stock market DNE the economy.
I see two ways out of this: A) Companies start magically spreading the wealth by trickling down wage and benefit increases to the proles; B) We get serious about progressive taxation and at least raise the floor under everyone (better SS, healthcare reform, better shared services, infrastructure, higher minimum wage, etc).
A has the virtue of appealing to everyone, but it will NEVER, EVER, EVER, EVER, EVER HAPPEN (short of mass unionization, which will never happen either). B could actually happen (see all of Europe), but it would be an insanely radical sea change for America.
So I’m fundamentally pessimistic.
Europe didn’t get where it is because they are just nicer than Americans. Europeans had centuries of unrest, revolution and war due to social inequality. Their elites got murdered in the streets on a regular basis and wars winnowed generations of young men.
They got sick of it. They got smarter. And they changed. That’s why Europe has a stronger safety net and a taxation system that makes it much harder to be a billionaire.
I’m not sure that’s an optimistic realization when it comes to the U.S.
The one thing that annoys me about this debate is that I feel that most of the people in it are entirely missing the point. (On both sides).
A good portion of those jobs are Never. Coming. Back. In order to know why, you’d have to step away from your computers and step out of the office, and go actually do those jobs. The reality is that traditionally, there’s a lot of “fat” in the workplace. Extra people would be hired to cover busy periods, or if people called in sick, or whatever. Those days are by and large over. From what I see on the ground, most of the job losses have to do with trimming this fat.
There’s no reason to think that afterward most companies will ever go back to previous staffing levels. Why should they? They make more profit this way..well at least in the short term. It’s a real “tragedy of the commons” type problem. It’s actually better for everybody for the workplace to be kinda chubby. But it’s detrimental to the individual who can assume that everybody else is doing the right thing.
It used to be that if you worked people too hard, or didn’t pay them enough, they’d quit and find another job. There is no “another job” these days, especially with health care linked to employment. So you tell someone to work 25% harder so you can lay off 25% of your staff and there’s no real recourse.
It’s a very unequal market. How to fix it? The only way I can see doing it is reducing to 30-hour workweeks, along with a controlled deinflation of cost of living elements. Oh. And labor laws with serious teeth. (As in habitual offenders get turned into employee owned co-ops)
Montysano (All Hail Marx & Lennon)
Very true. Add to that the reality that many of the jobs were tied to the illusory “wealth” that was created over the last decade. This is another of Kunstler’s themes: that much of our economy is tied to the creation and maintenance of a way of life that has no future, i.e. suburban and exurban living, where every family lives in a 4000 sq/ft house, has two new cars, commutes 40 miles each way to work, and lives in proximity to giant “clusterfucks” of big box stores and strip malls (Kunstler’s “Geography of Nowhere”). He predicted vast swaths of abandoned commercial real estate in the near future, and indeed commercial real estate is on life support as we speak. Even here in north Alabama, with apparently one of the strongest economies in the nation (war is good business), the vacancies are piling up.
If this way of life is indeed a dead end, then so be it. I’m not looking forward to the pain we’ll all suffer, but a way of life that is dependent on every American having several de facto slaves working in his behalf needs to come to an end.
I’m with those who decry Reich saying things are bad because he doesn’t know what’s going to happen. They may be bad. They may be just sort of, meh. They may turn out okay.
What I’m pretty sure of, and on this I agree with Reich, is they aren’t going back to where they were. The thing that concerns me is how often Obama’s words sound like that’s where he’s trying to take it. “We need to get credit flowing again,” and such coming from him in an unending stream says to me that he has no vision for a future economy other than trying to recrank a dead engine.
We should listen to Tracy Jordan. After all, he had the foresight to invest in a company that specializes in dismantling bank signs. Said company has been doing very well.
I remember the 70’s as everyone being nice & friendly, sharing beer & doobies at redlights, passing joints down the row at concerts.
Montysano (All Hail Marx & Lennon)
I don’t remember the 70’s.
I remember the 70s as a time when people partied a lot and had a lot of fun. Then I turned 18 – the drinking age went to 21, AIDS became a problem, and the war on drugs really kicked in. And people say I am bitter for some reason.
Bob In Pacifica
Reich can declare that the economy is screwed up and can’t predict a way out because of the two choices ahead, one leads to hell on earth and there isn’t a powerful constituency to get to the other.
Someone discussed our economy as a “shell” with the rich getting richer and the rest of us becoming superfluous. One only needs to read history to find out what happens to useless bread-gobblers. Or Kunstler’s useless oil gobblers.
There are choices to be made that can turn things around. Get the government out of the oil protection racket (stop establishing beachheads for Exxon in the Mideast). Build America’s economy instead of shipping off jobs to China. Things like that. You see anyone in power wanting to do that? With 70% of Americans wanting a public option for healthcare you’ve got Max Baucus running interference for the insurance industry.
The reason why our government isn’t representing us in this economic mess is because we don’t have access to representative democracy.
Another guy I’ve found that discussed things like this years ago is William Grieder in his 1990’s book “One World,Ready or Not”. He discussed topics about outsourcing, globalization, and “the race to the bottom” regarding international competition for labor. The chapter on the financial industry and their rosy econometric modeling was very poignant for having written it in the mid 1990’s.His more recent book “Come Home America” speaks to many of these subjects as well.
Kunstler and Reich are right, and I hate them for it as much as the rest of you. Our economy was supporting a future economy that never happened because we borrowed against it so much that we didn’t have the money to build it in the first place. The Republicans loved it, the Democrats lived it, and damn near all of us didn’t want to upset the gravy train until it was too late.
Fuel and food are going to get very expensive, and inflation isn’t the only reason for that. We’re lucky that the Chinese are as focused on the American Dream as we have been, since otherwise the Sinophobes would be right about them buying us out. No oil reserves are being found that come close to the depletion in the fields we’re relying on right this minute. Mexico is going from an exporter to an importer of oil within a few years. The seas are going dead and being fished empty where possible. And drought and desertification are huge problems in the developing (soon to be called “stillborn”) world. Have a nice weekend.