The Great Depression for young people
If you have a son or daughter between the ages of nineteen and twenty-nine, looking for work, trying to restart their career or trying to catch on in another location, you have undoubtedly learned first-hand how difficult it is for them to get a job, or if one does find work, how much the jobs being offered these days are dead-end positions, with little chance for advancement and a limited future compared to what one might have experienced in any other recession in memory. Perhaps you are fooled by the numerous job postings for positions that don’t really exist because they have already been filled by an internal candidate. Universities have a lot of these “jobs posted.” If you find yourself in this position, you have an extra motivation for being outraged at how we have handled this deep recession and how unfairly we have distributed the burden of this costly, wasteful and corrupt financial meltdown. It is an outrage that we have allowed the Wall Street financiers who created this fiscal crisis, to reward themselves with huge bonuses, using the justification that “we deserve it because we are making money again.” The reality is that without the Federal funding they received, none of them would be making money and many of them might not have made their mortgage payments on time. A huge component of our taxpayer-financed bailout for Wall Street was given to those who were speculating in the market and did not deserve the rescue they received, anymore than we would think of compensating someone who lost their mortgage while betting on the roulette table in Las Vegas. But those are the types that got a lot of our money. I think Naomi Klein referred to this as the biggest class transfer of wealth in history, moving gigantic sums of money from the middle class and poor to the rich.
A gripping story, describing three generations within a family (the Nicholson family in Grafton, Mass) who experienced three different transitions in our economy, including the post-WW II, post-Vietnam and today’s recession, was published a few weeks ago in the New York Times. For the millennial generation of 18-29, the unemployment rate, officially at 14 percent, approaches the level for that group during the Great Depression. But, now add to that the 23 percent that have stopped looking for work, based on Bureau of Labor statistics, and you come up with a whopping unemployment rate of 37 percent, the highest it has been in more than three decades and within the range of the 1930s. For young adults seeking work today, this is their Great Depression. Adult unemployment in the Great Depression reached about 20% of the work force (though numbers for this period are not as accurate as today’s; some numbers that are higher for unemployment during the depression did not include classifying workers in emergency work, like the temporary work created by Federal jobs programs, etc as being employed).
Among the millennial generation, a college education helps, but the unemployment rate among college-educated young adults is currently at 5.5%, or nearly double what it was on the eve of the Great Recession in 2007. That is the highest level by two percentage points, since the bureau began keeping records in 1994 for those with at least four years of college. A college degree is no longer an insurance policy against prolonged unemployment. We have hollowed out our economy and exported many would be good paying jobs. So far there are no signs that things are getting better for any group of workers in our economy, quite independent of their level of education. Indeed, recent economic forecasts suggest that our economy will contract before it expands, as stimulus money runs dry and nothing is available to pick up the slack. Europe’s decision to introduce an anti-Keynesian fix to their problems, beginning with Greece, is compounding the issues we face in reaching for a more global and balanced economic recovery. So what happened?
A major fault line in our economic recovery strategy was the insufficient level of the stimulus package we engineered to soften the blow of the collapse. If we had invested somewhere between two and three times what we did invest as our stimulus package, we surely would have been seeing more light at the end of the tunnel by now (too much of the stimulus package was in the form of tax breaks, which are often not used or used late). Very likely, we would have started seeing new job growth through a stronger nurturing of the new economy we will require, as new businesses could have been generated based on the richest resource we have–our scientific and technological skill level, which now lies fallow because of poor investment decisions and too much money spent on propping up banks and corrupt financial institutions. This unfortunate outcome, the lack of a sufficient Keynesian response to our financial collapse, has left us with rich bankers and unemployed young people. Is that an even sensible trade? Where will our economy come from that we need in order to generate good-paying jobs that can fill the void and the reduce the vast unemployment debt we have accumulated as the biggest obstacle for our future? Right now we seem to be content to let the bankers get away with it and allow our young people to suffer. They are paying the real cost of this economic disaster.
The youngest member of the Nicholson family, caught in exactly this circumstance, remains optimistic about his future, a very different outlook compared to those who went through the Great Depression in the 1930s. Let’s hope we can right our ship in sufficient time to reward his optimism and start generating the new economy by investing in the one area where we stand a chance of regaining leadership–the art and science of saving our planet and learning to live within the limitations of finite planetary resources. Are we that stupid? Have we been out-Foxed? Is corporate power too much for us to resist and prevent us from reshaping our economic foundations? I don’t think so, but these numbers for the unemployment among young people must become more broadly known and right now the traditional media that we rely on for news refuses to get down and dirty in the places we need in order to flush out and reveal the truly suffering class, our youth, who are currently spared from despair by their innate optimism. How much longer can that last? It would be better for all of us if it didn’t last much beyond tomorrow because it is fixable.
As a companion to the worst recession since the Great Depression, we have a political and financial system that got embedded in the army and acquired the art of generating financial bubbles. Those same people that gave us our bubbles, including the dot com and the sub-prime mortgage fiasco, have given us a solution by a massive transfer of wealth that has yet to be recognized as such. Scott Nicholson’s good paying job went into buying a Goldman Sachs executive a new house and a new boat and a twenty five year lease on an expensive boat slip in Long Island.
According to Lou Dubose, editor of The Washington Spectator (highly recommended), here is what the banking industry visited on our economy: $14 trillion in lost household wealth; 8 million jobs gone, not yet returned or even on the horizon (thus the need for brand new ones); 200 community banks closed and more than $14 trillion in bailouts accompanied by a staggering increase in deficit spending needed to keep the economy out of a depression (it just wasn’t enough to give us a good jump start). The credit default swaps that swamped our economy were created by speculators that didn’t actually own the stock in question. What they made was a bet about whether one stock might default and another investor gave them credit default swap insurance against that happening. Neither investor actually invested in the company per se. By the time credit default-swap trading destroyed the economy, 90 percent of the traders were speculators and many of them were banks. Furthermore, it was the Wall Street bond lawyers who wrote the “Commodities Future Modernization Act” that Phil Gramm held up as the wave for our new future in 2000. With the final regulatory constraints out of the way, over the counter derivatives went from $100 trillion in 2000 to $600 trillion when the economy collapsed in 2008–that was 10 times the GDP of the entire world! Graham was Wall Street’s operative in the Senate, but the bill had strong support from Clinton’s Treasury Secretary (Larry Summers–now in charge of Obama’s National Economic Council). Not surprisingly that bill also had the strong endorsement of Alan Greenspan. The same people who engineered our financial meltdown are now engineering our recovery. Any wonder why we are not seeing anything close to a recovery? Is there any doubt why the recovery that was engineered for us to enjoy is not enjoyable at all? Obama hired the wrong team. We need a new one. For starters, I would recommend Joseph Stiglitz.
RFM
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