America’s hidden pains

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from William Neil

We begin with some gross numbers from Das’ Age of Stagnation: the loss of wealth from the Great Recession of 2008-2009. Citing the work of three economists at the Federal Reserve Bank of Dallas (Tyler Atkinson, David Luttrell and Harvey Rosenblum), the figures they put on the loss to the U.S. economy come to 6-14 trillion dollars, “equivalent to U.S. $50,000 to U.S. $120,000 for every American household, or 40-90% of one year’s economic output”. We’ve seen figures of family distress ranging from $20,000-$60,000, largely representing losses in the stock market, which seem on target from direct personal experience. The other factor driving towards a more lasting economic pain are those who lost enough in straight financial terms to forestall market re-entry, matched with a psychological aversion to ever trusting it again. Additionally, pension fund retirement viability was affected by the same dynamics. These factors must be considered, as difficult as they are to quantify, to qualify the otherwise impressive performance after 2010 in the financial markets, they being supported by all the permutations known as Quantitative Easing, American and European versions.   

In the fall of 2015, and in many ways now seeming to be an overlooked clue as to what was about to unfold in the election of 2016, Nobel prize winning economist Angus Deaton and his wife Anne Case (both of Princeton University) caused a sensation in the news. It was because of their research findings disclosing a dramatic rise in the death rates, by 22%, among whites 45-54 years old, among those who only had a high school degree. The dramatic mortality increase occurred in the years 1999-2014. According to the coverage and commentary in the New York Times, this dramatic increase in mortality rates wasn’t caused by the usual suspects – heart disease and diabetes – but by “an epidemic of suicides and afflictions stemming from substance abuse: alcoholic liver disease and overdoes of heroin and prescription opioids”. Professor Deaton declared that “Only HIV/AIDS in contemporary times has done anything like this…”

Additional commentary in the Times’ article, by Dartmouth College economists Ellen Meara and Jonathan S. Skinner, put the findings in further relevant context for our purposes here:

“The least educated also had the most financial distress… in the period examined by Dr. Deaton and Dr. Case, the inflation-adjusted income for households headed by a high school graduate fell by 19 percent.”

On the trail of further hidden economic distress, the Federal Reserve itself has been conducting surveys since 2013 entitled “Report on the Economic Well-Being of U.S. Households”. The most reported finding of these surveys, contained in the formal reports issued now annually by the Board of Governors, was that nearly half of the respondents, 47%, “said they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money”. In other words, almost half of American households have no personal savings or personal financial “safety net”.

As reported in an Atlantic magazine article by Neal Gabler in the spring of 2016, in the heat of presidential campaigning, “The Secret Shame of Middle-Class Americans”, the distress goes beyond the inability to meet small financial emergencies of $400-$1,000, the range covered by the Federal Reserve surveys. Gabler introduces the research of Edward Wolff, an economist at New York University who has found that “median net worth (family net worth) has declined steeply in the past generation – down 85.3 percent from 1983 to 2013 for the bottom quintile, and down 63.5 percent for the second-lowest quintile, and down 25.8 percent for the third, or middle, quintile.”

So we are getting closer now, much closer, to answering two of our key questions: how much economic pain is “out there” in America, and how do we explain the divergence between the good “formal” economic numbers of low unemployment (under 5%) and very low inflation (2.5% average for 2016) touted by the President and his “heir apparent,” Secretary Clinton, and those remarkable pre-election poll numbers showing 70% or more Americans feel the nation is on “the wrong track”. Economist Wolff, from NYU, summarizes the crux of the matter this way: “… the typical American family is in ‘desperate straits’.”

This would be bad enough, the precarious imbalance in American household finances, which must be coupled with what William Greider and John Gray have told us is also a permanent sense of precarious employment and career uncertainty, the result of nearly four decades upheavals in production and distribution methods, and labor markets world-wide. But we have also called attention to the role of cultural upheaval in our search for the reasons underlying the triumph of Trump in 2016. While economists are likely to have a strong inclination to keep the two strands of reasoning quite separate, our contemporary dilemmas and a fuller interdisciplinary methodology calls us to inquiries resting on a broader foundation.

What we have in mind is what author and TED talk guest speaker Hannah Rosin explored in her book and lectures under the title The End of Men: And the Rise of Women (2012). The essence of her argument is that women are eclipsing men in educational attainment, in the ranks of middle management, and in founding new businesses, relying in part on their “traditional” interpersonal skills and sensitivities. We should note, as she does, that this does not mean the end to the glass ceiling still firmly in place for most of the highest institutional perches of the 1%. After all, Satyajit Das, wearing his financial journalist hat for us now, reports that women make up only about 20% of the attendees at Davos, such as it is: the actual historical location, full of ironic portent, for the setting of Thomas Mann’s novel, The Magic Mountain (1924).

The ground covered by Rosin, a skillful public speaker, seems pretty solid; unfortunately for men, this substantial rise and improvement for the freedom and careers open to women, has come at a time when the traditional careers for men in the declining industrial economy have had the bottom fall out.  Thus the dramatic shifting in gender roles which has continued from its start in the 1960s, also covers the decades of demise for blue collar workers, especially in the 1970s, as documented by Judith Stein’s Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (2010) and Jefferson Cowie’s Stayin’ Alive: The 1970s and the Last Days of the Working Class (also 2010).

These books describe, in painful detail, the initial shifts inside the Democratic Party away from labor’s hopeful agenda for a new New Deal as portrayed through the fumbling of the Carter administration, thoroughly unenthused about Labor Law reform, Industrial Policy and Full Employment guarantees, and also Health Care reform. Instead, the new directions were disclosed by mighty efforts for de-regulation of the airline and trucking industries and the decidedly non-nationalist effort to cede the Panama Canal back to Panama. We shall say no more about these complex matters, other than to suggest the dynamics from a very likely scenario: of a husband coming home with a plant closing notice only to find that his wife has received a Small Business Administration loan to open a thrift shop on Main Street in Youngstown, Ohio.

Youngstown, Ohio was ground zero for the disaster which befell the entire Mahoning Valley: the demise of the steel industry, the shedding of 50,000 jobs, 1975-1985. George Packer, in his 2013 account The Unwinding: An Inner History of the New America, tells us that

“if the institutions and the people who led them had understood what was about to happen to Youngstown, and then to the wider region, they might have worked out a policy to manage deindustrialization instead of simply allowing it to happen.”

Instead,

“between 1979 and 1980, bankruptcies in Youngstown doubled, and in 1982, unemployment in the Mahoning Valley reached almost 22 percent – the highest anywhere in the country.”

Revealingly, Packer tells of the rise and fall of Youngstown through the story of a black woman’s “survivor’s tale”, a struggle and eventual career success built out of the rubble of her home town. Yet the meaning for the entire country heading into the heart of the Reagan years was crystalized by a former auto worker turned college professor, John Russo, who eulogized the disaster with the epitaph: “The idea that this was systemic didn’t occur.” That sentence was written despite the fine attempt of Barry Bluestone and Bennett Harrison to do precisely that: see deindustrialization as a systemic national economic problem, in their 1982 book, The Deindustrialization of America.

from “Major miscalculations: globalization, economic pain, social dislocation and the rise of Trump”
William Neil          download pdf