Robert Reich doesn’t buy that there will be a quick recovery. In fact, in his view, there is a radically re-shaped economy and talking about a “V” shaped recession or a “U” shaped recession probably isn’t accurate.
Personally, I don’t buy into either camp. In a recession this deep, recovery doesn’t depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.
Problem is, consumers won’t start spending until they have money in their pockets and feel reasonably secure. But they don’t have the money, and it’s hard to see where it will come from. They can’t borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water — owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can’t are hunkering down, as they must.
Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can’t be built on replacements. Don’t expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don’t rely on exports. The global economy is contracting.
Then one comes across stuff like this from Firedog Lake:
Workers returned Tuesday to the job at Stella D’Oro Biscuit Co. in the Bronx after a judge ordered the company reinstate the 136 employees who had remained strong throughout a brutal 11-month strike. But before they could even walk through the doors, they were greeted with the anti-union response by the company’s private equity firm owners, the 21st century’s mutation of the robber barons: Brynwood Partners announced it would shut down operations in October. (“Private equity firms” is the euphemism those leveraged buyout corporations adopted after leveraged buyout got a bad name in the 1980s.)
Too often in our “national discourse,” such that it is, income inequality is discussed in solely moral terms. There’s also a utilitarian side, in that consumers who are under economic pressure are not going to spend freely. All those traders who cheered Rick Santelli in the spring might want to stick that in their cigar and smoke it.
If a rising tide lifts all boats, as the old aphorism goes, then maybe we really do need a major reform of labor laws, as the author at Firedog Lake suggests, so that the playing field is less slanted towards corporations and ultra-wealthy investors. For some reason trying to destroy unions is considered a good business practice in this country, and it creates an irrational distortion in the labor marketplace.
The right to form unions and bargain collectively is not only the law, it is a birthright to all Americans that was paid for in blood. Somehow many other industrial democracies manage to have large unions and still make great stuff. You kind of wonder if some of the Wall Street types ever stop to consider whether unionized workers built their fancy sports car. Probably not is my guess.
As long as right-to-starve states and anti-union ideologues at major corporations are allowed to relentlessly attack wages and benefits, the nation faces a zero-sum game where producing quality products and services takes a back seat to screwing over regular folks, usually to the sound of cheers from Wall Street. While this system benefits a relative few in the financial sector, it’s been a disaster for wide swaths of the economy.
If Reich is correct that there will be a “new economy,” the shape that it takes is a legitimate topic for debate for all Americans.