America’s future: Enduring recession?

Americans have been taught to hope for the best, but we need to push for more policies that support job creation

Topics: Next New Deal, Jobs, Unemployment, Barack Obama, Mitt Romney,

This originally appeared on Next New Deal.

America’s national optimism is so pervasive that not much public thought has yet been given to the possibility that the Great Recession could endure for many years. Even if GDP, the Dow Jones, and other standard economic indicators suggest that the overall economy is healthy once more, labor markets may not recover. Thus, all employment-related indicators could remain low to the end of the decade and beyond, justifying a guess about the social and political effects of an enduring recession. (Guess must be underlined because many unexpected happenings can always wreck predictions.)
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If the country faces a continuing labor market recession, short- and long-term unemployment are likely to rise. So will underemployment, such as involuntary part-time work and shorter work weeks for full-time workers. Discouraged workers will continue to drop out of the labor market, older ones will head for involuntary retirement, and some young people may not obtain a steady job during the entire period. The total number of labor market victims will rise well above the current official estimate of close to 15 percent of the labor force. And this estimate leaves out other victims of the recession — people brought down by foreclosures, humongous debt, and lost pensions, as well as poor people driven into more severe poverty.

If the numbers rise sufficiently, the social effects of the enduring recession, which are now still mostly hidden, will become apparent. High levels of depression and other emotional illnesses and related physical ones will multiply, as will family conflict and breakup, interpersonal and criminal violence, and other kinds of self and social destruction. Militant extremists threatening bodily destruction of immigrant and other vulnerable populations may increase in number as well. The medical community and the media are likely to be talking about post-traumatic economic stress disorder. America will be full of very unhappy people.

Of course, November 6, 2012, could bring a Democratic victory of sufficient proportions so that the advocates of serious government action to revive the economy could get their way. If the Democratic majority in the Senate is filibuster-proof and the president is prepared to be transformative, only the conservative House Republicans can effectively sabotage their agenda. If all went well, a new, large, and targeted stimulus, complemented by tax reforms and related policies, would enable the federal government to help create decent jobs and provide sufficient income support for the still-jobless victims of the recession. In the process, consumer demand would be stimulated and the consumer economy would be revived.

But in the event that government continues to be polarized and dysfunctional, politics could worsen economic victimization. In hard economic times, even the economically secure citizens tend to become less generous toward victims, worrying that government funds for the suffering would be taken out of their income and wealth. Some will fear that they will become economic victims too. The greater the shrinkage in public generosity, the greater also the readiness to demonize the economy’s victims. The better off and even some not so well off are already describing the needy as moochers or takers and the jobless as too lazy to work. The recession’s victims will be described as undeserving of help. Since the better off are more likely to be white and the economic victims disproportionally nonwhite, the latter will probably also experience more intense racial antagonism.

Since many Americans still see no difference between family and governmental budgets, and since recessionary times require familial belt-tightening, many people even outside the GOP base might support additional governmental belt-tightening as well. As a result, elected officials who are required to cut their budgets can further reduce the welfare state and welfare programs without suffering political consequences. And despite what people tell the pollsters about the desirability of higher taxes on the rich, the citizens that matter politically do not seem to contest the GOP argument that the wealthy need further tax reductions so that they can be “job creators.”

So far, my long-range guessing has emphasized the dark side of the future, but some corrective measures could take place, too. Three such developments seem most likely.

The first is new economic growth. All recessions and depressions, great or small, must end some day, and presumably so will the present one. They could end as a result of the pent up demand that is unfulfilled during deflationary times; for example, as people’s necessities wear out and the population increases.

Demand may also return as a result of unpredictable new economic growth resulting from technological and other innovations. New products resulting from cyberspace breakthroughs, including robots as standard equipment at work and at home, are possible examples. So are new industries and businesses to help people survive 105-degree summers.

To be sure, American innovations that can be copied by lower wage economies are eventually copied, and even correlations that once existed between a high GDP and a healthy labor market can no longer be guaranteed. If global competition and an expensive dollar, high U.S. worker productivity, employer reductions in wages and working conditions, and other current impediments to job security and a “middle class” income remain in place, America’s standard of living will not return to past levels.

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The Great Depression was ended by World War II, which eventually brought about full employment at high wages. Although possible future wars are presumably on the Pentagon’s drawing boards, they will not be labor-intensive and can no longer rescue a crippled labor market.

The second possibility is business community protest. Despite the business community’s never-ending demand for reductions in taxes and “onerous” regulations, one could imagine that eventually at least the big corporations that earn their profits from consumer demand will begin to hurt. As a result, they might support the public pressure on government to stimulate that demand. They might even do so while continuing to ask for lower taxes and less regulation; giving up such a once profitable ideology will take time. However, some might be ready to trade, supporting stimuli, infrastructure projects, and anything else that provides purchasing power to the people they need to buy their goods and services.

If the business community’s economic pain is sufficient, it might support a revival of the moderate Republican wing. Under such conditions, the rest of the party may agree to direct stimulation of the country’s purchasing power. Conceivably, such a GOP might even initiate some of the economic policies they have long prevented Democrats from implementing. One must remember that nearly half a century ago, President Nixon was able to persuade his party to let him initiate relations with Communist China.

The third possibility is popular protest. Although the Left has traditionally believed that eventually the general public will demand economic relief, America’s voters have only rarely pressed for such change. Right now, they seem to be angered more by social and related issues than economic ones. Or maybe they suspect that demonstrating for economic change is unlikely to be successful.

Moreover, mainstream America has become more diverse, more spread out, and harder to organize than in the past, and the radical unions that mobilized workers during the Great Depression no longer exist. New sociopolitical movements that fit the times are conceivable, but so far only some of the remaining Occupy groups are working toward economic goals, and none yet look as if they could turn into national movements. The victims of the current economy remain politically passive, if only because they must devote themselves to surviving economically and emotionally. In addition, they may feel (rightly) that they have nowhere to turn. Trust in government is at an all-time low, and other political organizations of the needed magnitude do not exist. Liberals and the left stand ready to offer help, but they have not shown that they can transcend the class and ideological differences that separate them from the economy’s victims.

Historians still do not agree about the political effects of the popular protests that occurred during the Great Depression. The ghetto uprisings that took place in the 1960s, some simultaneously all across the country, did not produce immediate economic results. Since then, the de facto national incarceration policy has helped to keep the ghettos “quiet,” and in recent years, the poor young men not (yet) in jail seem to have more often taken their discontents out on each other.

Perhaps effective political responses to the recession will emerge when more affluent sectors of the population are seriously hurt by the economy, notably the professional and managerial classes that have flourished economically in recent decades. They are politically skillful and know how to make themselves heard. Even Republicans might pick up their ears if the Tea Party and related groups, as well as the evangelicals who have previously concerned themselves only with “social” issues, indicate they now also need economic help. What if they hinted strongly that they will now have to vote their pocketbooks? Then it is even possible to imagine an election that unites many of the economically victimized and brings them together with liberals and liberally inclined independents, at least temporarily. If they can coalesce with others who stand to gain from a healthier labor market, they might be able to persuade the incumbent president to turn into a contemporary FDR or LBJ.

One would think that if a recessionary or deflationary economy endures, eventually something has to give. Although a dystopian welfare state in which the economy’s many victims will live at bare subsistence level is conceivable, perhaps America will instead elect a government devoted above all to saving and creating jobs. However, such ideas are credible only in a country in which ordinary people exercise more political clout than entrepreneurs and speculators.

Herbert J Gans is the Robert S. Lynd Professor Emeritus of Sociology at Columbia University. His most recent book is Imagining America in 2033 (2008).

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