Are we talking depression or is it just Chicken Little?
It seems almost everyone has a “sky-is-falling” attitude toward the economy these days.
You know we’re in trouble when long-time NPR commentator Daniel Schorr starts singing depression era songs.
“I have found myself reflecting on the recession, no depression, that I experienced in my youth,” said 92-year-old Schorr in his analysis yesterday of our present economy. After describing the horrific economic tragedy of the Depression, he then was asked by Liane Hansen, the host of NPR’s Weekend Edition, about the music of the era. He said there was one song he remembered, “Brother, Can You Spare a Dime.”
It’s a haunting song about the Great Depression written by Yip Harburg.
They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it’s done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it’s done. Brother, can you spare a dime?
Here’s a more updated version by George Michael I love:
While it was a great radio moment, hearing Schorr sing the old tune a cappella, I couldn’t help but think these type of comparisons are hurting all of us.
I know, Starbucks is closing 600 stores and with that 12,000 jobs will be lost. And the U.S. auto industry is in a tail spin. Not to mention banking and the brokerage industry. Thousands of jobs among hourly workers, and even among the mansion set have been hacked and slashed.
But are we really talking economic collapse? There’s been so much shrill in the media lately and among politicians that it got me wondering if we really should be making any analogies to the Depression.
Since I didn’t live through that time I figured I had to ask a historian if our present economic state mirrors the Depression, or have we all lost our minds?
“I’d be happy to offer my two cents though you ask quite the large question,” says Peter Cole, an associate professor and labor historian from Western Illinois University.
“My short answer is no, we are nowhere near the economic conditions of the Great Depression, fortunately,” he maintains.
Phew!
“While foreclosures are at the level that they were then, seeing that unemployment is SO much lower that there’s really no comparison,” he adds.
You all might be wondering why I’m making such a big deal out of this. Why I care that some people equate our present situation to something much more dire.
The reason is simple, if we think the sky is falling we may be apt to make rash career decisions right now. We may be convinced to accept less pay or benefits because everything is falling apart, and oh, aren’t we lucky that an employer has offered us a job at all.
This is never a good way to navigate through your work life, with a sense of panic.
Look, it is bad out there right now. We’re all struggling with higher prices and many of our jobs could be up on the chopping block, but we have to resist this crowd mentality of fear. There are still jobs to be had and many companies are stilling turning in profits.
So, take a deep breath and concentrate, with a level head, on your own situation and your own job opportunities.
Clearly, there are economic problems, but our worries may be feeding the flames.
Here are some more of Cole’s insights:
The tremendous anxiousness of most US workers and the powerlessness most feel, the ever-dwindling number of folks with employer-based health and retirement benefits, the very real fear that globalization will result in more jobs lost (not just in manufacturing), the seemingly-endless decline of US organized labor (essential, I believe, for a healthy society and economy with a large middle class) all suggest real issues that dramatically affect the lives of us workers as well as the entire economy. Just look at the stats on number of strikes today compared to previous decades; SO much lower. That, too, is a result of not just Bush’s anti-worker National Labor Relations Board and the Department of Labor but longer trends of corporations cavalierly ignoring US labor law because they know no enforcement is happening.
I wouldn’t say that the problems we are facing our trivial, not by a long shot, but I wouldn’t say that they have risen (or, perhaps, I should say fallen) to the level of the 1930s. Of course, it was the economic crisis of the 30s that produced many of the programs that ALL Americans have benefited from for almost a century as well as a revitalized labor movement that greatly democratized workplaces and our nation. Americans are more individualistic today but I believe that a dose of collective action would be quite beneficial. But Americans and US workers are scared and individualistic and unions are weak, if attempting to rectify that.
Now I understand being spurred to take “collective action”. But that can only be spurred by anger and disgust on the part of workers who believe they’re getting the shaft, and not because pundits, journalists and politicians pull a Chicken Little on us and have everyone running scared.
July 7th, 2008 at 3:04 pm
As a young man, I remember the doom and gloom predictions that rose as we saw wave after wave of consolidation and layoffs in the auto industry. Yes, it was bad (and some areas of the country have not yet fully recovered–but that is another topic), but that was also at the time when the information technology industry and the robotics industry began to boom. Our perspective is very limited when we are in the midst of the waves.
When I recently took a position with a manufacturing firm, I was surprised to learn that they had not experienced any slowdown. In fact, over the past three years, the company has seen (and continues to see) tremendous growth. The hardest thing about the current economic slump is that it is not as broad or universal as were some historic downturns.
It’s also hard on a personal level–in relationships–with other families who have taken more of a hit while I have seen my income rise significantly over the past two years (due, largely, to increases when changing jobs–once between departments at one employer, and then again when I took my current position). I’m a technologist, not an executive, so I realize how blessed I am to have seen such income.
It just goes to show that not all people are experiencing the hard side of this downturn, and that there are even areas where there is tremendous growth.
July 7th, 2008 at 8:34 pm
This is so interesting and helpful, thanks! I still do think that there are vast numbers of Americans who are pretending it’s not as bad as it really is, but your article raises an excellent point–the unemployment rate is actually a far better indicator than the foreclosure rate (once you factor in the sub-prime mortgages that never should have closed in the first place). I suppose the question now is…where is the unemployment rate going? Will it stay the same or get worse?
As a side note, my family and I represent far too many of us in this country–we let our prosperity pull us down a path of consumerism and consumption that had to stop. The belt-tightening that the current downturn has caused us is actually a good, necessary thing. We’re in better financial shape for it, and better poised for a real depression, if America gets there.
July 7th, 2008 at 10:14 pm
As a small business owner, I’m more concerned than ever; yet, business is - dare I say it? - GOOD. I try not to let my worry get the best of me, but at the end of the day, it really is the trepidation of it all that’s hurting the most. I have an opportunity to grow - should I do it or wait until the turbulence dies down? Unfortunately, that insecurity, especially if it’s of the masses, will be most detrimental to our current economic situation.
On a personal note, I couldn’t agree more with Viviana’s comments on belt-tightening. In the month of June, my husband and I decided to make a contest of sorts out of cutting costs. We finally read our bills in detail (imagine that!) and, after a couple of phone calls and a few minor adjustments, lowered our bills by about $600-$700 a month. The easiest thing we did? We changed our grocery shopping routine - Dollar Tree for cleaning products, canned goods, paper products, cooking supplies; Farmer’s Market for majority of food/beverage (all organic at a fraction of Whole Foods); lastly, the grocery store for diapers and toiletries.
You know who introduced me to this new way of shopping? My grandmother, who lived through the Depression and now lives on a meager social security check. I never imagined I would be shopping the dollar stores, but I’ve swallowed my pride and have learned the thrill of being thrifty rather than excessive. Along the way, I’ve learned a valuable lesson for both home and business - you can do more and grow more when cost controls are a top priority…don’t wait for the Great Depression to start.
July 8th, 2008 at 8:19 am
What great advice Hannah. You made me remember the blog post I wrote on my mother and how she thinks we’ve all just overburdened our wallets with tons of junk we don’t need. http://www.evetahmincioglu.com/web/blog/2008/04/06/good-morning-good-morning/
July 8th, 2008 at 9:25 am
Hannah, we’ve tried dollar stores, too, but found that some items (some cleansers, detergents) from those stores do not clean as well as some brand name products. We’ve found that there is even a difference between some second-tier and some first-tier items at regular retail (e.g., laundry detergents). Would you write more about your experiences (and choices)? What works well? Are there any name-brand products that you still purchase?
Perhaps we’ll give it another go at the dollar store.
July 10th, 2008 at 7:50 pm
Eve,
I read your posting and I have to say I disagree that economists and media pundits are going “Chicken Little” on us. We’re in a really bad situation right now. In the early 1990s the Boskin Commission was convened to examine moving “Toward a More Accurate Measure of the Cost of Living”. The leaders of the time saw the spiraling payouts for Social Security and other entitlement programs and wanted a way to minimize the adjustments to help control the budget deficits. So they changed the calculations so that they would read artificially low and so that it would look like Americans were experiencing unprecedented wealth, when in reality their buying power and real wages were greatly diminishing. At the end of the 1990s ,shortly after Clinton ok’d the changes to the CPI the tech bubble burst and we saw the market correction of the early 2000s. Then 9/11 occurred shaking both investor and consumer confidence, in response Alan Greenspan went on his rate-cutting spree (along with his established policy of expanding the money supply). The cuts led to historically low mortgage rates which caused real estate values to explode.
From 2003 to 2007 America’s supposed “wealth” was due to cash-outs and sale profits from inflated home values. I saw it first-hand as a real-estate closer and after a few years of hearing people tell me about their double-digit home value increases I put it together that the market was extremely inflated so I got out of the industry altogether and advised others to do so as well.
All this time nobody noticed that the median US household income in absolute dollars has been declining every year. So now the party is over for real estate and property values are coming in line with the reality of the economic conditions. Consumers are now realizing their wages have been stagnant and their buying power is greatly diminished. No one noticed the problems for years until now, and they’re painfullly apparent. The middle class has been decimated by layoffs, outsourcing, and stagnant wages for quite some time. The middle class is what drives consumer spending which in turn drives around 70% of our economy. I think now we will see what the consequences are of not having a strong middle class. Now that the property value ATM is out of cash there is nothing to drive consumer spending and the big ugly reality is here staring us in the face. The amount of correction that is needed is tremendous and it will likely take a while before the economy starts growing again.
My thoughts as an average citizen who tries to stay informed,
-Jon
P.S.- Hannah Bower, great advice!
July 10th, 2008 at 10:15 pm
Eve, great post - thank you for taking a step back from the hype that seems to be prevalent in society today. I was not born until WELL after the last depression into this country, so I can’t say I’ve experienced any of it first hand; but I have read the historical accounts, and the one thing that stands out in memory more than anything is that during the Great Depression, there were people jumping off of buildings as a direct result of the economy. I hope we never get to that point again, but if we do then I think it will be safe to say that things are about as bad as ever.