Recession Or Depression?

   The depth of our economic troubles and the degree to which a recovery is or is not occurring is open to argument.   It’s a lot to try and sort out, particularly for those of us who haven’t been blessed with an advanced degree in economics or business.  Like the people who got us into this monetary mess with their infernal sub-prime mortgages and financial “instruments” and “derivatives” only  Wall Street insiders can understand.   Are the business schools teaching ethics?  Do ethics play any role at all in business or has our business culture degenerated into nothing more than a philosophy of “greed is good” and “he who dies with the most toys wins?”

I have a feeling the business schools put on a front of teaching ethics but hand out degrees with a wink and a nod, knowing their grads are going out into Madoff infested waters where the type of individual who was once considered to be “principled” will be cut to pieces and kicked to the curb.

Better to go for all you can get.  Just don’t get caught.  And if you do, beg to be bailed out.

While unpopular among the common folk, the so-called “TARP” bailout, may not have been all that bad after all.    I can’t be sure, because I’m not an economist.  Still, on June 12, the Los Angeles Times reported that TARP’s outstanding balance is now smaller than the amount that’s been repaid.   Repayments, the paper says, have hit $194 billion, while $190 billion is still outstanding.    Of course when you include loans to automakers and other monies thrown this way and that, the whole federal “too big to fail” collapse and subsequent bailout magilla is actually expected to run into trillions of dollars.   A trillion, is a thousand billion.  I looked it up.

But who’s counting paper clips with such good news coming in?

Think about it.  For the first time, TARP repayments are greater than the outstanding balance!   Aren’t you glad you spent $100 thousand on your MBA so that you can understand all this stuff and feel really good about it while regular folk are forced to sit around and worry as the Senate again refuses to extend unemployment benefits?

Nationally,  unemployment is running at 9.7%.  That’s down from 9.9% in April.   Unless you’re in Nevada, where the rate rose to 14%.  Still things do appear to be looking up, with unemployment numbers dropping in 37 states and rising in only 6.   Here in Los Angeles, we still have some catching up to do with unemployment running at 12.1% while the State of California is sitting around 11.9%.   Just be glad you aren’t in Kern County, where the rate in May came in at 15.7%, down from  18.3% in March.  These numbers do move around, don’t they?

Still, taken strictly by the numbers, the unemployment situation appears to be improving, doesn’t it?  You simply have to ignore the fact that the improvement was caused by hundreds of thousands of Americans who have given up on looking for work.  They’re beaten.  They’ve given up and stopped trying to find anything, because there isn’t anything out there.

Let’s take stock.  For years American corporations have been sending their jobs”offshore” to take advantage of cheap labor with no union representation.   And now, most of the crap we’ve been brainwashed into buying comes from China, where little farm girls are being forced to live in stark dormitories, working 7-24 for peanuts to satisfy corporate greed and promote the destruction of the American middle class.

How does that make you feel?  Oh right, you’ve got a business degree so you’re able to think it through.  It isn’t personal, it’s only business.   Never mind the 13 attempted suicides and 10 deaths by suicide at China’s Foxconn Technology this year.   It’s only business.   Anyway, the Communist party will keep an eye on everything and make sure nothing goes radically wrong.  It’s business.  These things happen.

When did we start putting our trust in any Communist party to do the right thing?   Kinda like dancing with the devil, isn’t it?  Who came up with that one?

But back on target.  The jobs we once had are gone because Americans refused to work under conditions which at best, resemble forced labor.  But that alone wasn’t enough to make it happen.

The jobs are gone due to the Reagan Revolution and the deregulation it promoted, followed by George H.W. Bush,  Bill Clinton,  George W. Bush, and Gatt, and the WTO, and the so-called “New World Order,” and NAFTA, and the “right to work” superseding the right to earn a living wage, the destruction of the Glass-Steagall Act and on and on and on.

These guys and their rich corporate partners painted a bullseye on the chest of middle America and opened fire.  And hundreds of thousands of jobs were either eliminated or sent overseas.   It’s difficult to find solid numbers on just how many jobs U.S. companies have sent offshore, just a lot of estimates, but this piece from the Council on Foreign Relations is informative.

“Boston-based consultancy Forrester estimates that 400,000 service jobs have been lost to offshoring since 2000, with jobs leaving at a rate of 12,000 to 15,000 per month, says John McCarthy, the company’s director of research. Other estimates say up to 20,000 jobs a month may be moving overseas. This is in addition to the 2 million manufacturing jobs that are estimated to have moved offshore since 1983. These numbers are predicted to rise. Management consulting firm McKinsey & Company’s economic think tank, the McKinsey Global Institute, predicts that white-collar offshoring will increase at a rate of 30 percent to 40 percent over the next five years. By 2015, Forrester predicts, roughly 3.3 million service jobs will have moved offshore, including 1.7 million “back office” jobs such as payroll processing and accounting, and 473,000 jobs in the information technology industry.”-Council on Foreign Relations 2/20/04

Welcome to “Globalization.”   Good for the corporations and a relatively small percentage of wealthy Americans.

Bad for the rest of us.

Our unions are dead or struggling to survive, while the middle class is forced to work to the point of exhaustion not to get ahead, but just to sustain ourselves.  That’s because the wages paid to middle-Americans have stayed flat, while prices have risen and corporate profits have gone through the roof.  Or so the economists say.

For years, the folks up at the top of the economic ladder fought to destroy  federal regulations FDR put in place to prevent another Great Depression from happening.  They got Regan, Clinton and George W. Bush to do their bidding.   Now, with the regulations laid flat, their plan is complete.  The money is going to the top and the people up there are keeping it by hook or crook, leading to a society of “haves” and “have-nots.”   And when something goes wrong, they raid our national treasury under the banner of “too big to fail.”It’s the same old greed and arrogance driven syndrome that caused Louis XVI and Marie Antoinette to literally lose their heads.  Consider the following:

 “According to a Mercer CEO compensation study based on proxies issued in 2008, CEOs at the 50 largest U.S. corporations pulled in just under $14 million a year. But CEOs at medium-sized companies brought in $9.4 million; and CEOs at small companies got $4.7 million.  On average, at the 350 companies surveyed by Mercer, CEOs got $7.3 million. That comes to $28,000 per working day — a little less than the average worker makes in a year.” 

And this:

  “According to the Economic Policy Institute report, in 1965, U.S. CEOs in major companies earned 24 times more than a typical worker; by 2007, they made 275 times more. U.S. CEOs also make far more than CEOs in other advanced countries, the report said.  “The major CEOs pay is otherworldly,” said Larry Mishel, one of the authors of the Economic Policy Institute report.”-PolitiFact

Still, we’ve been here before.  We’re a “boom and bust” culture that survived the Great Depression.  Too bad we weren’t diligent enough to avoid a repeat performance.  Paul Krugman thinks that may be exactly what’s happening.

Krugman, writes in his column on 6/27/10:

“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.”  -New York Times

I have no idea if Krugman’s right or wrong.  I’m no economist and he is.  However, all those jobs that have left the country aren’t coming back.   In addition, thousands of temporary Census Bureau jobs  will expire in a number of weeks putting even more Americans out on unemployment.

We went through the boom of the Industrial Revolution and another boom following World War II.   Unfortunately, our booms have been followed by busts.  First came the dot-com bust.  Then the sub-prime mortgage bust.

With our jobs gone, the middle class left to fend for itself and nowhere left to boom, this could be it folks.   All that TARP money is out there but complaints continue that too little is getting into the hands of small business.   That’s a big problem.  If there is to be new job creation, it will likely come from small business.  So why are the big bankers sitting on all that TARP money instead of using it to get the economy moving by generating loans to small business?  Isn’t that why we gave them the money?

The following is from CNN:

‘A Thursday report from TARP’s watchdog, the Congressional Oversight Panel, spotlighted the severity of the shortfall. “Small business credit remains severely constricted,” the report’s authors wrote. “Unable to find credit, many small businesses have had to shut their doors, and some of the survivors are still struggling to find adequate financing.”‘-CNN/Money 5-13-10

Time to end the denial and face facts.   We can save small business, our middle class and our American way of life, or we can let calculating corporate wonks and big bankers run roughshod over what used to be the greatest nation on earth.

We are losing what we had because our once representative government has been bought off and neutered by economic interests.   It appears that setting things right will require nothing short of a reexamination of both our political and corporate structures and the idea that the good of the very few outweighs the good of the many.

Americans have always had hope for a better future.  That hope is slowly being eliminated.

Should you still doubt the depth of the hole we’re in, please consider the following.

A study just released by the PEW Research Center indicates that fifty-five percent of all Americans have been laid off or experienced a cut in pay, a reduction in hours or have been pushed into part-time work involuntarily.   Fifty-five percent.  And for the first time in history, General Motors is selling more cars in China than in the United States.

One thought on “Recession Or Depression?”

  1. ” … Are the business schools teaching ethics? … ”

    I’m afraid the answer is no, they teach moral relativism. This is one, of many reasons that the current crisis is likely to last a long time. It seems to me that we are in the midst of one of those ‘game-changing’ crises that take a long time to sort out, like the Great Depression, or the Johnson-Nixon-Ford-Carter years.

    I would not be surprised if the current crisis lasts to 2016 or beyond. See:

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