I’m starting to think I shouldn’t read Bloomberg BusinessWeek anymore.
It seems that every week is either (1) a tale of how people just like me are screwed, economics-wise, for the rest of our lives, or (2) a demonstration that the country or even the world is screwed, economics-wise, until the end. Or both.
Example number one is “The Slow Disappearance of the American Working Man“:
As President Barack Obama puts together a new jobs plan to be revealed shortly after Labor Day, he is up against a powerful force, long in the making, that has gone virtually unnoticed in the debate over how to put people back to work: Employers are increasingly giving up on the American man.
If that sounds bleak, it’s because it is. The portion of men who work and their median wages have been eroding since the early 1970s. For decades the impact of this fact was softened in many families by the increasing number of women who went to work and took up the slack. More recently, the housing bubble helped to mask it by boosting the male-dominated construction trades, which employed millions. When real estate ultimately crashed, so did the prospects for many men. The portion of men holding a job—any job, full- or part-time—fell to 63.5 percent in July—hovering stubbornly near the low point of 63.3 percent it reached in December 2009. These are the lowest numbers in statistics going back to 1948. Among the critical category of prime working-age men between 25 and 54, only 81.2 percent held jobs, a barely noticeable improvement from its low point last year—and still well below the depths of the 1982-83 recession, when employment among prime-age men never dropped below 85 percent. To put those numbers in perspective, consider that in 1969, 95 percent of men in their prime working years had a job.
The story’s proposed solutions may sound familiar from, oh, two years ago:
Grappling with these intractable problems won’t likely be Obama’s top priority. He is under pressure to do something that will be felt now, not a generation from now. The longer people who are currently unemployed remain out of work, the more their skills will atrophy and the greater the risk of a cohort of men—and women—who become permanently detached from the workplace. Anything that raises employment overall would help. Obama is expected to propose tax incentives for employers to hire workers, a reduction in payroll taxes employers pay, and spending on infrastructure. Money for labor-intensive projects, such as retrofitting buildings for energy conservation or refurbishing aging schools, would be especially effective in putting men back to work in construction—though Washington is likely in no mood to pay for that either.
The problem, of course, is that (1) federal finances are so trashed that there is no money to pay for any of this, but even if the money existed, (2) the 2009 stimulus didn’t work, so thinking Stimulus II will work is a triumph of hope over experience.
You know things are bad when a business magazine has nice things to say about Karl Marx, as in “Give Karl Marx a Chance to Save the World Economy“:
Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.
Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in Das Kapital, companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”
The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant. …
So how do we address this crisis? To put Marx’s spirit back in the box, policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures. The crisis isn’t temporary, and it certainly won’t be cured by the ideological passion for government austerity.
(Interesting, isn’t it, that the fact that Marx spawned one of the most hideous, murderous ideologies of the 20th century appears to not bother Magnus in the least, because, hey, all opinions are valid.)
Author George Magnus comes up with five ideas, three of which aren’t exactly earth-shattering: allow restructuring of mortgage debt, give banks in good condition “some temporary capital adequacy relief to try to get new credit flowing to small companies especially,” and “extend the lower interest rates and longer payment terms recently proposed for Greece” to other Euro-zone countries.
The first and last are more controversial:
Fifth, to build defenses against the risk of falling into deflation and stagnation, central banks should look beyond bond- buying programs, and instead target a growth rate of nominal economic output. This would allow a temporary period of moderately higher inflation that could push inflation-adjusted interest rates well below zero and facilitate a lowering of debt burdens.
The lesson of late 1970s inflation followed by the early 1980s recession was that while unemployment affects the unemployed, inflation affects everyone. We discovered during $4-per-gallon gas in 2008 that high oil prices affect most parts of the economy, particularly anything that requires transportation to get from producer to buyer. Back in 2009, I heard an Associated Bank economist suggest that higher inflation was OK, because we know how to curb inflation. (Of course, the cure for higher inflation — higher interest rates — substantially depresses the economy, including particularly construction. And in case you haven’t noticed, not much new construction is taking place right now.)
As for Magnus’ first point
“We have to sustain aggregate demand and income growth, or else we could fall into a debt trap along with serious social consequences. Governments that don’t face an imminent debt crisis — including the U.S., Germany and the U.K. — must make employment creation the litmus test of policy. … Cutting employer payroll taxes and creating fiscal incentives to encourage companies to hire people and invest would do for a start.”
Of course, payroll taxes have already been temporarily cut. (Apparently we no longer need be concerned about the financial condition of Social Security and Medicare.) Fiscal incentives, coming from a government already drowning in red ink, are not likely to encourage companies to hire employees if those companies don’t have enough business to keep their employees busy. (Then again, attacking job creators because of the size of corporate profits — as if profits are ever a bad thing, or “too high” — doesn’t improve the economy either. In fact, in 2010, that approach increased unemployment … among Democratic politicians.)
Magnus’ last point — “We can’t know how these proposals might work out, or what their unintended consequences might be,” but “the policy status quo isn’t acceptable, either” — echoes presidential candidate Franklin Roosevelt: “The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.”
Well, the U.S. did try a lot of somethings in the 1930s. And none of them worked to end the Great Depression. World War II didn’t end the Depression either, since most economists with a brain (which therefore excludes Paul Krugman) would not describe an economy with rationing, enforced savings, severely restricted availability of food and consumer goods, solving the unemployment problem by drafting most of the able-bodied into the military, and, by the way, millions of dead people as a strong economy. And doing what the Obama administration and its apparatchiks want to do — maliciously inflate taxes on the few successes in the economy — is guaranteed to make things even worse.
The best thing that can be said after reading this Bloomberg BusinessWeek is a quote from economist John Maynard Keynes, who other than his rapidly-being-discredited economic philosophy had one inarguable point: “In the long run we are all dead.”