Robert Reich, former Labor Secretary under President Clinton and one of the most candid, accurate and reliable commentators on the current economic situation, stated on national TV Sunday that “the data are terrible,” the situation is “scary,” and “we’ve never been here before.”
Robert Reich, former Labor Secretary under President Clinton and one of the most candid, accurate and reliable commentators on the current economic situation, stated on national TV Sunday that “the data are terrible,” the situation is “scary,” and “we’ve never been here before.”How right he is. The latest data coming from the Bureau of Labor Statistics is downright ominous. As the Associated Press and Huffington Post reported this week, an under-appreciated statistic buried in the report revealed that the differential between the number of unemployed and the number of jobs available in the economy is at an all-time high.
Whereas in December 2007, there were 1.7 people unemployed for every one job opening, in November 2009 there were 6.4 unemployed people for each available job. That’s counting unemployment at 10 percent, not the 17 percent number that counts those no longer looking for work, or in part-time jobs when they need full-time ones.
The number of jobs open in the U.S. economy plunged from 4.7 million in June 2007 to half that number, 2.4 million, last November.
Ironically, both Wall Street and the Obama administration have vested interests in keeping this kind of data under wraps. For Wall Street, it threatens to discourage investors, heightening the likelihood they will either stay out of the market or leave it soon. For President Obama, the realities of the economy careening toward a double-dip plunge into an even deeper recession will hurt his standing in the eyes of the public, as well as his chances to keep strong Democratic control in Congress as a frightened and struggling U.S. population threatens to erupt in revolt against any and all incumbents.
There is a fundamental reality underlying the current situation that has apparently been missed in all this, and as a result the nation still runs the risk of sinking into a full-blown Depression. While Wall Street and Obama are on the same page when it comes to worrying about the economy, they are on entirely different pages when it comes to fixing it.
Wall Street wants a return to the approach of the pre-crash days when solutions involved reaching ever deeper into consumer wallets and purses to revive the economy. Sorry, you greedy fools, that simply won’t work now.
For Obama to fix this situation, he needs to understand what must happen on the most fundamental level. That is, the U.S. economy must make a difficult, paradigm shift away from a consumer-oriented economy to a production-oriented one.
In the explosive growth years of the U.S. economy that drove the nation from a colonial backwater to the most powerful country on earth, the U.S. Was a production-oriented nation, as China is today. Only after the Great Depression and World War II did a shift begin to occur in the U.S., and the concept of a citizen as a “consumer” emerged along with Madison Avenue and individual credit in the 1950s.
The economy shifted toward convincing these new “consumers” to buy everything from homes and cars to TV sets and sneakers, each new model more expensive than the last. Leveraging the profits from this led to not just a housing bubble, but a consumer bubble, overall.
The consumer bubble has burst. Not the housing bubble or the debt bubble, but the all-subsuming consumer bubble. Consumers are being revealed as citizens again, albeit as unemployed, underemployed, debt-swamped and truly struggling.
The consumer, as he or she was just two years ago, is gone and will not be coming back.
What is to be done? The nation needs to stoke the engines as never before of productive infrastructure and energy development with massive, gargantuan job and wealth-creating federal stimulus programs.
Don’t worry about the debt. If the debt is incurred in the process of creating wealth, it will be repaid. The issue with debt is always the purpose to which it is being put. If it generates growth, it is good. If it is squandered on greedy indulgences or a worthless war in Iraq, it is bad.
Finally, if the banks won’t lend, the government needs to lend directly to get this done.
Nicholas Benton may be emailed at [email protected]