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What Happens When Massive Unemployment Meets Irrational Exuberance?
Posted August 10, 2009
Picture the scene: Whiner-in-Chief, The Guru, and Offspring #2 were waiting for some sandwiches at a fairly deserted deli, on a very deserted Main Street, in an extremely small town in Western New York, in the midst of a college-visiting trip that ignored all the icky questions (how are we possibly going to pay for all this) while focusing on the search for #2’s best-of-all-possible schools.
W-i-C picked up a local newspaper (even without any other customers around, this place was seriously slow) with an eye-catching headline: “Job losses start to ease.” The news was good: Despite all expectations (including ours) that the U.S.’s unemployment rate was heading inevitably toward 10%, it dropped in July to 9.4%.
Euphoria. Only 247,000 jobs were lost in June. (Sorry if yours was one of them. We mean: Only 246,999 jobs that didn’t really matter, plus yours.)
And then there was the kicker: “It’s Over“ — !!!!! — at least according to a big tony British investment bank, Barclays Capital Research. Apparently, plenty of other economists now believe that June, 2009 will turn out to be the end of our unending string of bad economic news.
We’d like to believe that. Unfortunately, believing it necessitates our overlooking a few unpleasant realities, including:
1. We wouldn’t trust most economists and investment banks as far as we could throw them. Many of them have been trying to convince us that the worst was over since long before we even had an inkling of just how bad the worst could get.
2. There’s still more than enough bad news to go around. Remember all those long-term unemployed men and women we’ve been talking about? Their ranks grew by 584,000 to a whopping 5 million. Unemployment among blacks has reached 14.5%. It’s 12.3% for Hispanics. We could go on and on, but you get our message.
3. One-tenth of one percentage point does not a recovery make. Apparently, you need to be a whiner to realize what should be obvious to all of us. We suspect that it’s especially obvious in places like Michigan (June unemployment rate: 15.2%), Nevada (12.0%), and Kentucky (10.9%), where we’ll need to see a hell of a lot more in the way of green shoots before the unemployment crisis begins to show any significant signs of improvement.
4. Although we’re hearing occasional reports of people who have found jobs, we also continue to hear about people who are losing them. (Recent college graduate: extremely smart and personable, job experience includes a media internship and work at a landmark for foodies in Manhattan. Ideas, anyone?) Meanwhile, of course, there are all those extremely qualified people who can’t even convince companies to read their resumes anymore.
Need we say this? We’ve been burned by irrational exuberance before (stocks? real estate?), so we’d prefer our news reports tempered by reality. If we need to listen to a talking head, we prefer the kind that distrusts everything. That’s because we distrust everything.
Want us to start spending our little hearts out, now that unemployment — yippee — has dropped from 9.5% to 9.4%? Keep dreaming.
The Whiner wants to know: How do you feel about all this? Do you consider July’s unemployment rate to be a statistical blip or a sign that the good times are on their way back?
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Comment of the Day
- Crayon says, "we the unemployed, under employed, and the soon to be unemployed are under the impression that job creation and hiring marks the end of a recession. NO, no, no!!! It seems a recession can be pronounced over and still be a jobless recovery. A recession can be 'over' with people still not working and still losing their homes and businesses."
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forkboy1965
Let not the “good” news be taken seriously. There were reports in late July that a number of folks receiving unemployment were due to fall off the rolls as their benefits ran out at the end of July.
I would not be surprised if the drop in the official unemployment number was simply a reflection of those folks disappearing from the rolls as opposed to any of them actually finding jobs.
Note, as you did, that the long-term number went up, which may very well be those very folks whose benefits dried up.
Hope
My thoughts exactly, forkboy…people have fallen off the “officially counted” list.
No, I’m not relieved and relaxed and reentering the malls with enthusiasm. Nope. Not at all. I live in Michigan. We’re still reeling.
Diane
The unemployment rate is highly manipulated. In fact most government numbers = smoke and mirrors. Also, the mainstream media which cheerleads this BS, is such a discredited source of information that I am surprised people still tune in. Good times, my arse.
Larry
I got a job. You got a job. All God’s children got jobs…
Suz
Mark Twain said: There are lies, damn lies and statistics.
No jobs in this household for 14 months. But perception is everything. Employers who believe the Recession/Depression is waning might breathe a bit easier. Employed consumers might loosen their wallets a mite. Wait and see. And hope.
Crayon
Unemployment seems to be only one indicator light on the circuit board that determines the beginning and ending of a recession to the economic powerhouses. High unemployment figures alone do not equal recession to economists. Unbelievable as that seems, we the unemployed, under employed, and the soon to be unemployed are under the impression that job creation and hiring marks the end of a recession. NO, no, no!!! It seems a recession can be pronounced over and still be a jobless recovery. A recession can be “over” with people still not working and still losing their homes and businesses. Millions of people can be up a creek without a paddle while the banks are making profits again. It’s not about whether the tiresome worker ants have jobs, it’s about the soundness of mega investment banks. Banks happy and rolling in dough = recession over! That’s why Barclays can play “We called it first!” because they want bragging rights later. It’s a soulless game with them.
anita
New unemployment is lower because companies are already cut to the bone. Old unemployment is lower because people have run out of benefits. Some of us were never counted.
I’m off food stamps because I have a part time job. Part Time. This means that while I’m working 20 hours a week, now I can’t afford food again.
This is all just so freaking stupid.
Carl
First, as others have noted, the “official” government unemployment rate is beset with distortions, exaggerations, made up numbers, and just frankly, lies. Pay more attention to the “U6″ category–those workers who have stopped looking for work, those who have dropped off the unemployment rolls, part time workers who really want a full time job, and the like. That’s the “real” unemployment rate, and it’s at least 16% and change.
Second, given that 70% of the economy is consumer spending, where in the world is that going to come from? We are collectively broke; the last orgy of overconsumption has been based on debt, and there’s no more houses to refinance, credit cards to take out, and no jobs. If one of these “learned” economists (yes, I’m talking to you, Paul Krugman) can tell me where the money for restarting consumer spending is coming from, it would really help convince me that the worst is over.
Bruce Coulson
The term people are looking for (if realists) or avoiding (if you’re making the projections) is ’statistically insignificant’. I would be willing to bet the margin of error for unemployment numbers exceeds the claimed ‘reduction’. So, the ‘job loss drop’ is, at best, an overly-optimistic view of the numbers. At worst, the job loss may well have increased in June, as far as we know. Numbers may not lie; but the people who tell you what those numbers mean certainly can.
amy
Jill, you’re still overlooking the big story: There is no, repeat no, push from the Obama admin to fix the trade balance. None. They are busy with a backlog of Dem projects and promises, and the timing is rotten.
We have to sell more stuff abroad, and buy less stuff abroad. And the only way for that to happen is for individuals to make it happen. Yes, the feds can help, but not very much. Japan knows that story well. We have to actually sell stuff we can make money on abroad. Standing around moaning about how impossible and unfair this is — well, it’s just one way of passing the time, I guess, till you start writing checks to your Chinese landlord. Good times are not coming back, period, until we fix. the. big. problem.
It’s going to be very, very hard. But not, I think, impossible. However, we currently lack the will, and that’s a disaster. The big O could turn us around on this, I think. He’s got a bully pulpit. He’s got Joe — Joe would be marvelous at this kind of thing, better than Obama, I think, who tends to get scoldy. But he aint’ doing it. I hope it’s because Obama’s beholden and not because he himself is in denial about the problems.
Anyway, I was offered more work at lunch today, which I gratefully accepted. I will now be out of my mind with work all fall, which was stupid, but so it goes.
Coastman
At the risk of sounding anti-social, I have stopped reading the headlines, for the most part. I am focused on me, & my family, and keeping my business profitable. We have cut back somewhat, but live a pretty modest lifestyle to begin with, so no real crisis here.
The few headlines I have read are talking about how the banks & investment houses are once again gearing up to pay huge bonuses. I guess that 6-12 months from now the “market” will trickle down to the “little people” again and we will feel smug about not abandoning our 401(k) plans altogether. Once again, we will feast on the crumbs from the King’s table. Sounds like we are a bunch of cockroaches.
As I approach age 50, I rather disgustedly am coming to the conclusion that the Golden Rule sums it up best:
“He who has the gold, makes the rules”.
The rest of us are just bozos on the bus (w/ apologies to George C.).
alicia
I’m enjoying revisiting liberal blogs that I used to frequent before Obama got elected. What’s the problem, people? Aren’t feeling too much hope lately? Not happy with the ‘new america’ Obama promised you? Or are you just not content with Obama’s vision because it’s a bit different than what you could have imagined?
How are things looking? Surely you must realize that without jobs more and more people must depend on the government for a handout. Don’t like being on the po’ side of the tracks? Obama’s payback feels like a bitch, doesn’t it? It’s called retribution and Obama ain’t taking no for an answer. Doesn’t really matter to him if the national debt is in the trillions. He just got to have his way y’all.
He nationalized the banks. He never corrected Wall Street like he done promised. Obama took over the last american car manufacturers (GM and Chrysler) and is vowing to destroy whatever will be left of Ford. Don’t you think it off that he and congress took out that ‘american made’ part on the cash 4 clunkers deal? everybody done run out and bought themselves a honda, toyota and hyndai. Where those cars made again? Japan, china? and then GM just announced they are laying off another 13,000 employees. Hope it ain’t those union jobs that’ll be going.
You all know the truth because you can see it with your own eyes yet you still believe the econ is on the rise cause unemployment isn’t at 9.5%. Nope. It’s 9.4%. Y’all feel better now, don’t you?
And if you don’t believe the words of Obama regarding the economy how in darn nation can you believe his words regarding health care? (he really is going to control your lives through end of life group meetings when y’all turn 65 and he really isn’t going to carefully consider who stay born and who dies upon childbirth-sort of a way of controlling the masses)
Oh, if you don’t like what I am saying, you can just go forward this email off to the White House. Nothing like ratting out your fellow (legal) citizens. Or trying to intimidate a person’s right to free speech for fear the feds will come a knocking at your front door. And this just in: when you browse a WH website, a cookie will come your way (just like Amazon) and the gov will be watching what you do, what sites you visit, etc. etc. But unlike Amazon, the feds won’t be selling you a new book or DVD. Nah. They’ll just be watching your every move. Worse than that G. W. Bush y’all used to so violently hate.
Yup. I sure do like carousing through all the old liberal hangouts I used to do. Nice hearing how things turned out for y’all.
Have a nice day, hear.
Dan
Barclays, Barclays… now where do I remember them from?
Big old bank-check. but what else? Oh yes, I recall something like this:
“Barclays helps to fund President Robert Mugabe’s regime in Zimbabwe.The most controversial of a set of loans provided by Barclays is the £30m it gives to help sustain land reforms that saw Mugabe seize white-owned farmland and drive more than 100,000 black workers from their homes.”
ick. Don’t step in the Barclays…..
But hey, business is business right? I mean what’s IMPORTANT isn’t Barclays ethics, but they’re SUCESSFULL!
Unless, um, oh yeah, there’s that too:
“In March 2009 it was reported that in 2008, Barclays received billions of dollars from its insurance arrangements with AIG, including $8.5bn from funds provided by the United States taxpayers to bail out AIG”
So there you have it- we bailed out these jokers (so good is the US taxpayer we’ll even bail out FOREIGN banks!)
and now the folks that readily do business with war criminals and dictators tell us the recession is over.
To (badly)paraphrase John Fogarty:
Did you hear them talk about it on the radio?
Could your eyes believe the writing on the wall?
Sounds just like Deja Vue all over again
Dan
And to answer WIC: We’re on our way back to good times in the same sense as France, Germany, England- that is to say PERMANENT double-digit unemployment. 9.4% isn’t the bottom.
I’d say the “official” bottom will be more like 11.25%.
Again, look at what has happened to unemployment in europe.
With the incredible productivity of the American worker why hire more people? Maybe it’s not about greed-I would’nt want to hire people then turn around and lay them off.
Recovery or not. I just don’t see jobs coming back-unless you work on Wall Street.
Philip David Morgan
Allow me to put it point blank: I’ve come to even take National Public Radio pieces about the economy with more than the usual grain of salt. I have found full–time work, but it’s in a warehouse — and it’s dealing with returned medicines and the like. Day in, day out. And for lower pay to boot.
Carl
Dunno if you remember that far back, Alicia, but Obama got handed a poisoned chalice. Remember last fall, when everything just kinda went up in smoke? What was your president doing then? Oh, I forgot, his Treasury Secretary, the one who used to work at Goldman Sachs, went to Congress and threatened that the end of the world as we know it was going to happen unless we bailed out the banks, in addition to threatening the head of BOA into merging with Merrill Lynch. Oh yes, it’s true that our friend Obama hasn’t been quite the change we’ve been hoping for, what with installing the same old Gollum Sucks players in official positions, but let’s not descend to Faux News-level and pretend that this economic meltdown happened yesterday, or January 20th for that matter.
Suz
Alicia,
Thank you for the vivid demonstration of willful ignorance, and through your chosen patois, a dollop of bigotry.
bill-k
I’d like to mention this again. The site http://www.shadowstats.com/alternate_data
shows unemployment as figured from the 30s until during the Clinton administration. At that time it was decided not to include anyone unemployed more than 1 year.
If that original way of figuring unemployment is used, true unemployment is 20.5%.
Not included are 8+ million working parttime jobs because they can’t find fulltime work. Or selfemployed who are not doing much.
The unemployment figure in the Depression was 25%.
I would not use the official unemployment figures for anything.
abo gato
Suz beat me to it, but Alicia, your racism is showing by the choice you made in how to frame your most recent comment here.
Enjoy your day.
forkboy1965
I for one am glad alicia dropped by and “blessed” us with her opinion. It only reminds me of low has sunk the Republican Party and the ranks that now swell its membership.
There was a time in my life when I felt comfortable voting for a Republican, when I thought they were the best choice. No more. Reagan, in some ways, made me re-think this position, but it took the reign of King George for me to realize the Republican Party had become the realm of racists, bigots, xenophiles, and, generally speaking, anti-intellectuals.
Reagan’s famous quote about government not being the solution, but being part of the problem was a mantra that has become fully and utterly embraced by the right wing of the Republican Party. And it’s a shame because it is a very un-Republican position when viewed in a historical context. Republicans used to believe that government was a necessary and vital part of what made America great. They believed that government should be as small as possible, but still believed it served an important role.
No longer.
But isn’t it funny how these sorts of folks, who hate and despise the notion of government run healthcare, have no problem with government run national defense. Or a government run postal system. Or governments paving roads and highways. Putting in sewage and water lines. They don’t seemingly have a problem with BIG GOVERNMENT providing all sorts of daily comforts and conveniences, yet somehow providing healthcare is too big and too scary for their poor wee minds to handle.
I’d say it is sad, but they have opted for a route of ignorance. A route paved by their Party at the behest of those who run both their Party and, to be frank, this nation: the corporate overlords.
Suz
Allow me to add, a non-extreme right-wing Republican is not necessarily a liberal. I’m long weary of that label thrown at anyone who disagrees with often contradictory right-wing Repub rhetoric.
Such is still a refrain of “if you’re not with us, you’re against us.” Yes, I can and do lean so-called liberal in many social contexts. In others and financially, I’ve always been conservative. Which puts me and I’ll wager most of the population in a centrist category–one that does not seem to exist at all. But for the past decade, if not longer, anyone who doesn’t lockstep with Republican extremism is damned as a liberal.
As Jesus would be to anyone with a remote understanding of His teachings and life as portrayed in the New Testament.
If everyone in this country doesn’t wise up and start thinking beyond bumper-sticker mentality, beyond with us 100% or therefore against us 100%, the future is anything but rosy, regardless of what political group is in power.
alicia
FYI-y’all, I’m not even an American citizen yet you think I’m a republican. I can’t hold myself back from laughing. I just get a big ole kick out of you people. Anyone who voices an opinion that isn’t liberal is termed a racist, a republican, a right winged nut. I love it!
Enjoy life with Obama. Not all europeans think he is the messiah! We patiently watch as the US implodes from within.
Y’all have a nice day. Ya hear.
Dan
To Suz- Mr. Limbaugh put it quite eloquently ” nuance is for liberals”. Forkboy has summed up the “modern” Republican party perfectly. Eisenhower must have spun in his grave like a turbine during the reign of King George.
You are NOT allowed to even attempt to think differently-no?
OK. Think back to President Bush’s appearances where people were screened out and even arrested.
Please understand I mean no disrespect all to you Suz- I am very glad your here. I hope anybody could come here and share their thoughts as long as it’s done essentially respectfully. When Limbaugh said that I thought it perfectly summarized the mentality of the last 8 years.
At the outbreak of the Iraq war I felt pretty sure that:
1: The US will be there for at least a decade, not 3 months
2: It will cost hundreds of billions of dollars
3: There will be many unintended consequences
The venom spitting conservatives called people like me who merely SUGGESTED that this was unlikely to be a “cakewalk” traitors, terrorists and so much else.
YOU ARE WITH US OR AGAINST US. No nuance, no trying to understand different points of view: You are good or evil.
I don’t know if Bush was the worst president ever, but he sure gave it his BEST shot and undoubtably ranks very, very low (right down there next to his zombie V.P)
Diane
Alicia,
As a political atheist (which is the biggest growing “non” party in the US), whose creed is: “Both parties suck equally”, I found nothing racist or wrong with your post. I appreciate a strong opinion, and you expressed it well.
P.S. And I agree that this prez is a one time loser, I mean, termer….40% approval rating by the Fall. Book it.
amy
Oh, come on, that’s funny. “Nuance is for liberals.” OK.
This cone of silence here around recapturing global markets is really quite remarkable. Is it that none of you knows anything about international trade (Jill, you ought to), or that whining is preferable to working on the problem?
amy
Where’d T. Boone Pickens go, anyway?
Bruce Coulson
It looks like a lot of people are drifting off-topic.
1. The figures that are quoted as showing we are coming out of our depression are meaningless; literally. Without listing the ‘margin of error’ that all such broad lists must have, the people giving us a rosy estimate of the future might as well have made up the figure on the spot.
2. No matter what they are saying to us, they know better. These firms have access to the raw numbers and margins of error. So, whatever they’re trying to get us to do, it’s for THEIR benefit, not ours.
Crayon
Off topic, I wondered why alicia didn’t spell America or American with a capital A. The southern and mountain region “speak” seemed stilted and strained as well. ROFL!!!!
http://www.bestessaytips.com/am_capitalization.php
amy
and still siiiiilence from you all about the trade deficit. Numbers out today say it’s growing again.
Noelle
Apparently North Dakota is the place to get a job, it has the lowest unemployment rate in the nation. I have no idea why. Maybe the Michigan unemployed should move there.
Bruce Coulson
Amy. First, nothing any of us can do will affect the balance of trade. Second, the numbers showing that lack of balance are just as suspect as the numbers showing the depression is over. Third, as long as the people/corporations who pay for our politicians are satisfied with the current trade issues, nothing of real consequence will be done by either party. Fourth, at our social level in this country, venting about the things we cannot change is one of the few pleasures left to us as citizens.
amy
Bruce sez:
“Amy. First, nothing any of us can do will affect the balance of trade.”
Who do you think buys and sells stuff? The trade elves? People in the aggregate affect the balance of trade; you are one of them. No doubt in other contexts you talk about everyone doing their bit for [insert cause]; this is no different.
“Second, the numbers showing that lack of balance are just as suspect as the numbers showing the depression is over.”
No, we’ve been pretty reliably sucking in goods without paying for them for decades now. Minor discrepancies don’t matter, given the scale; it doesn’t really matter if we’re talking about 100 bn or 105 bn when we’re in the red. And the inescapable measure is the aggregate debt. The only way to keep buying without paying is to borrow, and borrow we do, on an heroic scale. Privately, corporately, and federally.
“Third, as long as the people/corporations who pay for our politicians are satisfied with the current trade issues, nothing of real consequence will be done by either party.”
Oh, you funny socialists. Governments do not engage in trade. Private citizens engage in trade. Governments can attempt to support trade, but generally it backfires; again, see Japan’s experiments with MITI. All governments can really do tradewise is move the fences around (see EU, GATT, Doha) and hope that this improves the circulation. But the beating heart of trade is private enterprise.
“Fourth, at our social level in this country, venting about the things we cannot change is one of the few pleasures left to us as citizens.”
Tosh.
Suz
Government is not involved in trade? Who sets tariffs? Which can and do skew the import/export equation, and in fact, could be the leading skewer affecting the U.S. trade imbalance. Paying tariffs to nations receiving U.S. goods, but not collecting tariffs on imports, or collecting a lesser amount than U.S. goods are charged has an enormous affect on the deficit or surplus or balance. Assuming the latter still exists.
As does what one might term a preferential corporate trader status, which many U.S. businesses enjoy and their competitors may not. Or not to as great a degree of favoritism.
It seems common sense that U.S. manufacturing and agricultural production dropping exponentially creates a need for a larger percentage of imported goods. Thus how any country can produce far less of those traditionally exported goods, while that country’s demand for them increases without creating a trade imbalance is beyond me.
Bruce Coulson
@Amy. We’ve been living in a socialist, government managed economy for 150+ years now. Get over it. The government, in the United States and most world nations, is heavily involved in matters of trade because the big business community wants them to be.
No, I do not expect people to ‘do their bit’; I expect people to be selfish, short-sighted, and only interested in what benefits them.
Whether you want to admit it or not, the US government is run by and for the major corporations, and the government policies reflect that. When a single Federal election for a congressional seat can run to millions of dollars; well, that money is NOT coming from private citizens.
Businesses exist to make money. Period. If they can make more money by destroying competition through government regulations than by encouraging a reduction of trade deficits, that’s what they’ll do.
Private citizens can affect the world economy? How? What control do YOU have over what major corporations choose to do? We’re living in a global age, and it’s cheaper to manufacture goods out of country. That’s not going to change.
amy
Suz writes:
“Government is not involved in trade? Who sets tariffs?”
No, I said governments do not _engage_ in trade. Governments do not make and sell goods and services, unless you want to count the brokering they do in arms trading. Without private enterprise there is no international trade. Governments only regulate and try to support (or block) it.
“It seems common sense that U.S. manufacturing and agricultural production dropping exponentially creates a need for a larger percentage of imported goods.”
Fine. That means we need to find a way to pay for them. Either we figure out a way to take back manufacture markets or we make up the loss in value-added markets.
“Thus how any country can produce far less of those traditionally exported goods, while that country’s demand for them increases without creating a trade imbalance is beyond me.”
Me too. Unfortunately, crying ‘helpless’ does not help. If you eat, you must pay. If you buy abroad, you must pay. And there’s only so long you can do that on the tab, no matter whether you’re a drunk at the bar or a global hegemon.
I am deeply impressed by the depth of refusal to face the music here.
amy
Bruce writes: “We’ve been living in a socialist, government managed economy for 150+ years now. Get over it. The government, in the United States and most world nations, is heavily involved in matters of trade because the big business community wants them to be.”
It doesn’t matter who manages the economy, so long as money out is equal to or less than money in.
All big business communities everywhere want their national govts involved in trade, because only national govts can jerry-rig the trade rules to domestic advantage. That’s not the problem. The problem is that we spend much more than we make abroad.
“No, I do not expect people to ‘do their bit’; I expect people to be selfish, short-sighted, and only interested in what benefits them.”
In that case we’re in deep trouble. The current situation calls on them to be selfish with a longer view.
“Whether you want to admit it or not, the US government is run by and for the major corporations, and the government policies reflect that. When a single Federal election for a congressional seat can run to millions of dollars; well, that money is NOT coming from private citizens.”
This is entirely beside the point, which is that we need to sell more abroad than we buy. Otherwise we cease to be a rich nation, the power goes away, and you’ll find that many freedoms and privileges you take for granted go away with it. Such as, for instance, the freedom to shoot your mouth off at will online.
“Businesses exist to make money. Period. If they can make more money by destroying competition through government regulations than by encouraging a reduction of trade deficits, that’s what they’ll do.”
Not for long they won’t, because — as has been demonstrated in some graphic detail lately — you cannot make a living selling to broke people. If you want to see where the money is, look nine o’clock and five o’clock.
“Private citizens can affect the world economy? How?”
THEY SELL THINGS. Yes, I know, you don’t know anything about this, because money comes from the paycheck elves.
“What control do YOU have over what major corporations choose to do? We’re living in a global age, and it’s cheaper to manufacture goods out of country. That’s not going to change.”
Then you either figure out how to sell value-added and make it up on ticket, or you reduce your living standards to the point where you can compete, dominate markets, and scramble back up onto the ledge of prosperity.
It’s not really a fancy story. Just one of those “gravity works” stories.
Alternately, you can lie there pissing and moaning, and watch as the nice rest of the world does not come to rescue you, and instead takes your — well, whatever it feels like taking.
I’d get up, if I wuz you. If you don’t know how to sell abroad, I’d start looking for people who do, and offer to work like it’s 1913. If you’re a research type, I’d start putting together a dog-and-pony show to do with where the opportunities for attack are in global markets, and break it down in useful terms for the business boys. Not the ginormocorps, that’s nonsense. The mid-sized corps that never have time or money to do that kind of research properly, but work the actual sales, and the entrepreneur outfits where the guy’s willing to take a flyer. You’d be surprised how many of them there are.
Bruce Coulson
@Amy.
The vast majority of businesses can look no more than 4 quarters (about a year) into the future. A policy that isn’t yielding a profit by then is going to be abandoned. And that year is being optimistic; managers want profits and results every quarter, and won’t look more than 3 months into the future.
Everything we used to make can be done more cheaply abroad. Unless transportation costs rise substantially, that won’t change. Many services can also be done abroad more cheaply than here, and companies are beginning to take advantage of that as well.
And yes, there’s every reason to believe we’ll cease to be a wealthy nation, at least at the level of the middle class and below, and your vision of a a highly restricted society is a reasonable extrapolation. (Although not the only possibility.
amy
Bruce writes:
“The vast majority of businesses can look no more than 4 quarters (about a year) into the future.”
This is not true. Businesses that are publicly held do have to tack hard to immediate profits, this is true. But most American businesses are still not publicly held.
A business owner or manager who cannot think more than a year ahead is in as much trouble as you are if you can’t think more than a year ahead. People look ahead and plan, knowing that events may come up and undo all those plans. The successful also make contingency plans (knowing, again, that those can be undone too).
Bruce whines on:
“Everything we used to make can be done more cheaply abroad. Unless transportation costs rise substantially, that won’t change. Many services can also be done abroad more cheaply than here, and companies are beginning to take advantage of that as well.”
Then we’d best figure out how to fix that, oughtn’t we. I’ve been here hanging around academialand and businessland for the better part of 25 years, and it’s very interesting, but I’ve seen this focus in only two times:
1. When the East Coast steel and textile industries finally came crashing to the ground;
2. After the fall of the Wall, when we behaved like a bunch of maroons and mistook commerce for government, and went rushing in to Eastern Europe and the Soviet Union trying to get in on the ground floor of future capitalist paradises.
That’s it. Beyond that, a concerted effort at doing whatever it takes to keep and grow American markets abroad has been totally out of fashion since the mid-80s. And even then it wasn’t really fashionable; handwringing was fashionable. We really haven’t been serious about this since the 50s, when we had an insane advantage. You have to look back further to see us doing it on grit.
Which we still have, Bruce notwithstanding. But if it’s allowed, it’ll pull us out. I am beginning to wonder whether it will be allowed, because the current admin is in some regards committed to a union mentality. And the problem with a union mentality in a time like this is that the people willing to work till they’re damn near dead makes the Bruces of the world look bad. This is not allowed in unionland, but we will need that kind of work.
Bruce continues:
“And yes, there’s every reason to believe we’ll cease to be a wealthy nation, at least at the level of the middle class and below, and your vision of a a highly restricted society is a reasonable extrapolation. (Although not the only possibility.”
What baloney is this, “a highly restricted society”? I am talking about a conquered society. A conquered nation. Poor nations do not retain power; they’re run (and raped) by other nations. I mean it’s one way to get Americans to pay attention to whatever the other global powers do and learn other languages — do you really think the average Brit followed American military policy in a semi-permanent state of apoplexy in 1850? — but it’s not the one I’d choose.
Bruce Coulson
@Amy.
First, we will not become a ‘conquered’ nation, at least not militarily.
Two. Multinational corporations are the ones who are in charge of modifications to the economy. Small businesses that can take advantage of those modifications (and avoid becoming bought up or forced out) can prosper, but they’re not the one making the changes.
Three. Things are cheaper to make abroad because a. the cost of living is substantially less and b. the citizens of those countries have less ability/power to negotiate a better deal. Obviously, if you could lower the cost of living to point in this country where $1 a day would be a marginally living wage, we could be competitive in manufacturing and services again. But as it is, the only services that are secure are those where it is impossible to out-source that service. Local freight transportation and garbage collection come to mind.
C. the current administration, like all administrations, is committed to remaining in power. The President would never have been elected if he was completely unacceptable to major business interests; he would never have been elected Senator, let alone President. The ‘union mentality’ you seem to see is campaign rhetoric. This President, like any President elected in the latter half of the 20th Century, will favor business over the people. The debate comes from which businesses will be favored.
D. “Grit.” I’m not entirely sure what you mean by that term. If you are referring to people working until they drop just to stay alive another day, I think you will find plenty of people are already doing that. If you are referring to becoming an entrepeneur, then I suggest that entrepeneurship, like being creative, is a quality that only a few people can actually make a living at.
Finally, I would appreciate you avoiding ad hominem attacks on me in the future. I have done you the courtesy of not making assumptions about your life and beliefs, other than as pertains to this discussion; I believe I should be entitled to the same courtesy in return. Ad hominem attacks suggest the speaker is aware that their arguments are flawed, and hence hope to win by destroying their opponent, rather than their arguments.
The Whiner
Thanks to all of you for a very important, very thoughtful discussion. Please keep it going. This in an essential topic for all of us.
As Longtime Whiners know, we value that caliber of our conversation as well as our mutual respect. That’s what this website is all about. We may disagree with each other, but we value each other’s contribution.
Here at EconoWhiner Central, we’re deeply grateful to each one of you for your good cheer, as well as for taking the time to share your insights and ideas with the rest of our community. As we like to say: Whine on!
amy
OK, I”ll post it again:
Bruce, what experience do you have in international trade?
Bruce Coulson
@Amy.
Other than being a consumer of goods, I have no experience with international trade. I’m quite sure there are a lot of arcane regulations, policies, and interest groups that I have no knowledge of.
The basic rule of business is ‘buy low, sell high’. This applies to goods, services, and labor. If it is cheaper to manufacture items and provide services overseas and sell them here, this is what businesses will do. The only way to have items manufactured here by business is to make it cheaper to manufacture them here. This can be done by lowering the wages of labor and materials (for items), or raising the costs of transportation (physical and electronic). Granted, since transportation costs factor into final costs, wages in this country would not have to be lowered to the level of the Third World in order for companies to show a profit. (Of course, if they are, then companies would show a greater profit.)
Businesses, like most large organizations, are inherently conservative, in the definition of “We’re making a profit this way; why change?”. Even when their current policies stop making a profit, companies are slow to change. Most of them go with the attitude “keep doing what we’re doing, but more of it.” At least, historically, this is how companies react. Government bailouts, despite the promises, do not in and of themselves change a business’ practices and policies. Rarely, a far-sighted leader can do so; cf. Lee Iaccoco and Chrysler. Even then, all Lee did (with the advantage of hindsight) is give Chrysler a few more years of life.
It takes a disastrous collapse to break down the cosy ties and ways of doing business for change to occur. Just like a forest fire clears the way for new growth, so does the collapse of major businesses allow for newer, more innovative (at that time) businesses to be founded, grow, and prosper.
Of course, the currently entrenched businesses have no intention of failing, and will use every lever they have to avoid it. They might even change; but I wouldn’t bet on it.
Bruce Coulson
@Amy
I have no experience in international trade, other than being a consumer.
The basic rule of business is ‘buy low, sell high’. If it is cheaper to manufacture items and provide services overseas, and then ship the products or services to the U.S., that is what businesses will do. The only way to have businesses manufacture items or provide services in the US is to make it cheaper to do so. This can be done by lowering the cost of local labor, or raising the costs of transportation (physical and electronic).
Businesses are conservative, in the sense that when they have a system that generates profit, they are loathe to change that system. This is true even when that system is failing to generate profits; historically, the business response has been to do what they were doing, only more of it. Government loans and bailouts, despite the promises, are unlikely to change how businesses do things.
Generally, it requires a catastrophic collapse of current businesses in order for change to happen. As major businesses fail, smaller ones emerge and begin to grow. Major businesses that hang on do so by actually changing to meet the new environment.
Businesses, understandably, have no interest in failing, and will use every lever at their command to avoid it. From using their political influence domestically to bribery abroad, businesses will do everything in their power to remain in existence. They might even change their business policies; but only as an absolute last resort (and sometimes not even then).
So, are you proposing lowering the costs of local labor (by both lowering the standard of living AND the costs of living), increasing the costs of foreign labor, or something else entirely?
amy
Bruce, trade is a lot less fancy than you imagine.
I have the fancy academic/governmental trade-analysis experience, yes; but I also have experience selling things to people abroad, which is trade. I grew up watching my grandfather and father sell things (food, consulting) abroad as small businessmen; that too is trade. If you sell something on eBay to a guy in Germany, that’s trade. Trade is only a name for the aggregate international sales. Many of the organic farmers around me trade internationally too. They’re not conglomerates, they’re not corporate giants with annual revenues bigger than most countries’ GDPs. They’re guys. Sometimes gals. I see them downtown.
We in the US do nearly all our sales domestically, and this hurts us. A large part of the problem is that we do not know foreign markets. Really, genuinely, “we had an old map of where the Chinese embassy was” don’t know. The Commerce Dept is useless for international trade as close to us culturally as Europe — when I worked for my Congressman, I used to give constituents my own business-in-Europe info rather than the wrong and badly out-of-date stuff from Commerce. State is also useless for business. The individual states run half-assed commerce missions abroad, usually staffed by some semi-retired worthy who likes the local wine. And the result is that every business goes it alone when trying to sell abroad. If you don’t already know the culture personally, you’re sunk. You’ll get no help from the feds or your state. They aren’t really interested in promoting trade.
So we don’t know the markets and that’s the first problem. We don’t even know what we _could_ sell successfully abroad. There’s no substantial support for business consortia trying to get out there and sell. We do have a few good schools that train young people in paying attention to foreign markets, and very often they get snapped up by foreign companies.
As for your other question, should we get used to less money –
We have two choices. We can find a way to sell value-added stuff at a high ticket price abroad (and we’ve not been a crashing success there except in IT, higher ed, and finance– oops), or we can grit our teeth, say, “Fuck it, we’re here to win,” and be as poor as necessary to win back those commodity markets. (Or be the kind of hegemonic villain you despise, and enslave a nation or two to be poor for us, as the Brits used to do. Not so easy these days.)
We have room to get a lot smarter and sell one hell of a lot better. We gave the specialty steel business away; we’re giving away radiology, and we’re letting go of pharma. We can do better (and, let me tell you, that would entail some internal ruthlessness with the ed system that I don’t think you’d like either, but our public ed sucks and isn’t up to the job; it’s also destroying the universities, rotting them from the freshman classes up). Can we get smart enough to live in the style to which we’ve become accustomed…that I don’t know. Frankly, I doubt it. But I don’t know.
(Something that should unnerve you: I talk to a few scornful, shocked Chinese grad students each year. They’ve grown up thinking that all of American universityland is MIT, and they work their rear ends off to get here. When they arrive, they find facilities worse than the ones they had in junior high school, vague teachers who treat them like slaves, and shockingly ignorant and lazy undergrads. They feel they’re wasting their time here, and tell me that they’d have done better to stay in China. We’ll see what happens over the next 20 years and what that American PhD will mean for them, but they could well be right. We have left a great big opening for higher ed in other countries to come take the market away from us.)
If we don’t get smart, though, the alternative is backbreaking work for not much pay and not much of this environmental protection doodad. That’s really it. We got rich the first time on factory girls and slaves, deforestation and mining. But we were willing to do it.
Either way, we’ll have to figure out how to buy less without pulling the sticks out from the rest of the global economy. We need to turn someone else into the consumer, and I have a couple of candidates in mind.
Also either way, the responsibility rests on individuals, not governments. Government can help and provide support. But government does not put together a sample case or a portfolio or ppt presentation and go knocking on foreign doors. And that’s exactly what trade is all about.
Bruce Coulson
@Amy.
You still seem to be stuck in the mentality that ‘individuals matter’. They don’t. The real money (and power) in the global economy is the multinational corporations. Like campaign contributions; although individuals may send money, the real money and attention come from the major players.
Multinationals don’t seem to have much difficulty in managing global markets, or making money right now, so they have no real incentive to change how things are being done. If the US Government does not support international trade for companies, it’s because the multinationals either don’t care about it, or they don’t want others to get access. And these are the players who control the engines of government.
The business ideal of economy was in the Gilded Age, or in many Third-World countries today. A small group of ultra-wealthy, a slightly larger group of desperate professionals trying to hang on to a moderate position of privilege, and a vast majority of barely-surviving workers. And governments picking up the tab to make sure the system keeps working.
Yes, the public education system has been severely damaged in this country. Again, who benefits? If the costs of providing higher education can be reduced, then so can the costs of employing people with degrees. It makes sense, business-wise, to outsource higher education to other countries with lower standards of living. I don’t expect the education system in this country to improve (except for the elite, Ivy-League schools that train the leaders of tomorrow; money is no expense for the ruling class).
The mythology of ‘rugged American individualism’ is just that; a myth. It is easier to organize money than people, and so big money, in the long run, always triumphs over the common people. The only changes that come are from struggles within the elites; tranportation companies aren’t happy with the high cost of fuel, and fight for cheaper gas or fuel alternatives, despite the efforts of Big Oil to stop them.
Removing environmental protections is another way of lowering short-term costs. The long-term costs are much higher, but again, businesses are incapable of looking that far ahead. The same with removing social services. In the short run, it means more money for big business. In the long run… there are a lot of possibilities, none of them good. But none of the people making these decisions now are likely to be alive when the bill comes due.
None of this prevents the rare individuals who are brilliant entrepeneurs from making a profit in the current crisis, or those that follow. But that’s cold comfort for the rest of us.
Dan
American hegemony is drawing to a close. The simple demographics of China and India are not likely to change. The US will likely remain the sole military superpower which is really just fine with China as we borrow from them to finance it-why would they want it any other way? Are we going to get in a land war with them? Nope. Just as we ceded the automotive industry to Japan while we remained much more powerful militarily I believe we’ll do the same with China and India.
amy
Dan, there’s no such thing as a military superpower that isn’t an economic superpower. When you see a well-armed nation with no money, you’re looking at a puppet, or, as it used to be called, a proxy state. Whose proxy do you want to be?
Bruce, if it makes you feel better to insist that you’re a helpless victim of corporate behemoths, go ahead. The stats don’t agree with you, though. I started off my career studying multinationals, before M&As took on the desperate air they did in the 90s, and I can tell you that even now, small business (under 500 employees) makes up more than half of private nonfarm GNP, nearly half of payroll. Midsized business is another good chunk. We have a lot — and I do mean a lot — of entrepreneurs in this country.
You may be surprised by how influential large American businesses are not elsewhere. This is not 1950, and the world is not anxious for GM to come and anoint. The EU regularly smashes our corporate giants in court — what was it Microsoft had to give them? A billion dollars? — and they’ve had a very difficult time gaining traction in China. They invest heavily elsewhere at the risk of war and nationalization.
The point is not that you, as a “rugged individual”, will singlehandedly turn the economy around. The point is that we have a tremendous number of small and midsized privately-held businesses, and that in the aggregate they have significant power. Are all of them reasonable candidates for international trade? No. But I bet a fair number are. Most proprietors who wind up selling internationally do so accidentally — you meet the right person, she suggests you send a sample to so-and-so, Mr. So-and-So likes it, and a partnership is struck up. I think we could goose that along.
I suggest you put down the Mother Jones once in a while and go explore the world of business, from a business POV, and see how it actually works. It’s pretty interesting stuff, and most of the people involved are not sitting three levels below a vice president. Even now.
If you think about it for about a minute and a half, you’ll see why it’s so. People like to be in charge of themselves, and opportunities arise all the time. Very large companies are not in a position to take them, just because of the nature of those companies. They don’t, as they say, turn on a dime. Galbraith described them pretty accurately, I think, forty years ago. And they know it, which is why they don’t bother much with starting up new things themselves, but wait for others to do it, and then try to eat the very successful ones. Sometimes they succeed, not always. Sometimes they succeed and get massive indigestion (see under: Media corporations).
There’s a lot of room in the understory of the business forest. Lot of biomass there. Don’t discount it.
You’ve also misunderstood me on ed. We have let the social workers wreck K12 by using it as a social services emporium, and we’ve let the teachers’ union kick it while it’s down by letting them do away with the idea that the teachers should actually know what they’re talking about. And — because they’re so poor now at turning out graduates who can read, write, and do arithmetic, let alone algebra — universities are being forced into doing remedial work for the first two years. It’s that or send many fewer people to college. Professors at non-elite universities no longer expect that their freshmen will know how to write papers, will know what a paper is, will know what plagiarism is, will be willing to read, or — in some cases — will be able to read fluently. They expect to spend considerable time on remedial work, and in fact I’ve been approached to write remedial college textbooks.
Can we fix that? Sure. It’ll hurt like hell, though; you’d have to be willing to throw a lot of teachers and administrators out of work, and you’d have to be willing to expel a whole lot of kids. There’s no reason why most kids couldn’t get the Ivy-prep sort of education rich kids get — it’s not as though the teachers get paid much, and kids, as far as I can make out, are kids — but you do have to be willing to be as serious and demanding about it as those rich kids’ parents are. And that I don’t think enough of the country is willing to be.
You should’ve heard the last Chinese grad student I talked to. She’s a math/sci girl, and normally, here, math/sci kids don’t know too much about the world outside those two things. But she was talking to me — in a language radically different from her own — with real passion about some enormous multi-part novel the kids in her grade school had to read, and let me tell you, this thing was no Harry Potter. This was literature.
They’re depantsing us in a pretty comprehensive way, you know. We could do something about it, but it’d involve a lot less whining and handwringing.
Bruce Coulson
@Amy.
Let me get this straight. You want to expel failing kids from school. Going to execute them as well, to prevent them from being a burden on society as criminals? Or did you expect those children to magically vanish? Running schools as a business, where you can simply get rid of non-performing employees, is part of what has gotten us into this mess. You want things to improve in education? Start giving enough money to schools per student so they can actually do their job. Repair or replace buildings (infrastructure). Start putting money back into Headstart and other programs to improve children’s education as early as possible. But I don’t see any of that happening. And I think you’re seriously mis-judging the majority of poor/lower class parents. Most of them WANT as good as edcuation as possible for their children; they know that’s the only way out. Many poor districts tax themselves at a much higher rate for schools than rich ones; it’s just that the money simply isn’t there.
Amy, not everyone (not even a sizable minority) is an entrepeneur, or wants to be one. Nor could our economy function if everyone worked for themselves in their own company. And, maybe all those small business, in total, do equal or exceed the multinationals. But will they all work in concert with each other? Or will they compete and fight for every scrap they can, trying to gain every advantage while denying their competition as much as possible? Could government spur overseas trade? Absolutely. Will all these small companies band together to demand that, or will they just try to get what they can on their own?
I don’t read Mother Jones. I read history. Go ahead, tell me businesses have changed in outlook from the Gilded Age. That businesses no longer seek government monies to protect them from risks, but keep any profits from those risks to themselves. That companies no longer invest in politicians to obtain favorable legislation. And that companies no longer put profit above all else, because they no longer owe a duty to their shareholders to do just that.
BTW, what are these “American” businesses you speak of? Are you contending that there are any major multinational companies that do not have some foreign subsidiaries that operate in, and generate profits from, their ‘country’ of origin?