The great depression of 2003

Great Debates
41

I should qualify my last statement: Based on the numbers relative to population as I understood them, we have not yet reached numbers that suggest we are in the same boat as we were in during the worst years of the Depression.

However, as I was measuring unemployment based on total population rather than total workforce, it could be that current totals of unemployed workers equal that of the Depression, and in that case, assuming job creation rates do not rally, I would say the hardship would be equal to that of the Depression.

In terms of total effect on the economy, the impact is much smaller now than it was then, and I do not believe we will get into a situation where the economy is affected to the degree that it was in the 30’s (i.e. 25%, and the corresponding ghastly high numbers of people out of work), but I prefer to look at it all in terms of the actual number of people shut out of the system.

Many of you in this thread seem to me to be saying, “No matter how bad things get, until I see those kind of percentages, I’m not worried”. The day the view out my window looks like 1934, apart from Toyotas replacing Studebakers, I will say things are just as bad now as they were then.

42

No, by “we” I mean we as a society, every man, woman in child in the country (including illegal immigrants).

I agree wholeheartedly. Poverty is poverty no matter how many people are involved. It’s tragic for one person to choose between medicine and food, and it’s tragic for ten million. The famous Josef Stalin quote about a million deaths, I think, is particularly applicable.

This is the disagreement. I think the vast bulk of the unemployed, today, are better off in practically all respects compared to their counterparts of 1933. I don’t mean they’re driving Cadillacs and eating caviar at the expense of Joe Taxpayer, I mean that most of them are housed in some manner and are able to get enough to eat so as to avoid death by starvation. Some are living lives just as rough as those migrating along Route 66 during the Dust Bowl days, but I think that if you take the number currently unemployed and compare it to the number unemployed in 1933, you’ll find a great deal less deprivation and starvation today.

Statistics to back this up, you say? I’m too tired to dig it up right now, but one telling number would be the average length of time the unemployed are spending between jobs. High turnover in the actual unemployed populace implies many are only spending brief periods of time unemployed, which further implies they have income coming in the rest of the year. Health statistics, if at all possible limited to those below poverty, would also be useful. Particularly incidence of death by starvation or cases of malnutrition. Statistics regarding federal and private spending for social programs specifically relating to the unemployed and those below some defined “low-income” level would be most useful, but hard to track down I would expect.

43

scotandrsn said:

You’ve got it wrong. The only way for the unemployment rate to stay constant is for new jobs to be created at the same rate as old ones are destroyed, plus additional jobs or cuts to make up for the changing size of the workforce overall due to immigration, retirement, etc.

When the economy ‘loses 200,000 jobs’, that just means that 200,000 more jobs were lost than were created. But if in a given year there are 5 million new jobs, but 5.2 million jobs are destroyed, then there is still plenty of job mobility. So the fact that unemployment is going up or down tells us exactly nothing about whether it’s the same 7% of the people out of work or not.

In fact, you could model a healthy, full employment economy that has a significantly high unemployment rate. Say, 10%. All you’d have to do is have an economy based on seasonal employment, or a highly dynamic economy that is constantly destroying and creating jobs of different types. That could cause a lot of job mobility, and the instantaneous unemployment rate could be quite high, and it still wouldn’t tell us much about whether or not the people were happy and employed.

For example, if you took a sample only from the population of contract computer engineers, you’d find that on average probably 20% of them are unemployed at any given time, simply because there is usually a fairly large gap between contracts. That doesn’t mean contract employees are unhappy.

44

No, contract employees love their lack of benefits, the low wages and the ease with which they can be fired. And if you believe that one … you might be an employer.

It seems to me that with the rise of contract employment, the loss of jobs overseas, the Republican dismantling of the social safety net, the generally declining economy, and the loss of good-paying manufacturing jobs to poor-paying service sector jobs, we are slowly sliding toward a permanent state of recession for the vast majority of folks. But it’s happening so slowly that people are psychologically adjusting bit by bit. It’s a frog-boiling thing.

If you saw a 6 percent drop in the employment rate in one year, a lot of people would suddenly REALIZE they’re in a depression, just as if you’d spiked up the heat of the water suddenly on a boiling frog.

45

When the buggy whip companies went out of business, you could go down the street and get a job at the auto company. When factories closed in the 1930’s, they eventually reopened or were replaced by another.

If you got laid off back then, you could get another job regardless of how old you were. Today, if you are over 50 and laid off, no one is going to hire you. It is pointless to retrain for a job that no one is going to hire you for anyway. Discrimination against age is a recent thing. In the old days, if you could do the work and were over 50, it didnt matter to the company how old you were. Today is does.

Todays closed factories which moved to China are never going to reopen. An american company has to be crazy to open a factory in america instead of in china where there is plenty of labor for $1 an hour.

If you talk about “employment numbers”, how many engineers and IT professionals are now flipping hamburgers? They are counted as “employed”.

Long term, we are outsourcing all of our professional and technical jobs. We are closing factories here in america and opening up factories in China.

46

I can quote stats and figures till I’m blue in the face (or fingers, as it were), and I can cite any number of manufacturing companies that are currently expanding (I know the local Whirlpool plant is expanding, and I just appraised a facility for an exporting manufacturer that has outgrown his current facility).

But, it’s all a moot point to you, so here’s the skinny: is there any condition that would make your proposition false? I need measurable, quantifiable data, something I can count and then report back with. For that matter, is there some data series you’re basing your position on? Something concrete and tangible? Or is it all just anecdotes and conjecture?

47

In most companies, one or more of the following has happened in the past decade:

1 - reduction or elimination of contributions to 401(k) plans,
2 - conversion of fixed benefit plans to “cash balance” plans, a kind of 401(k) hybrid, a thing which besides drastically lowering the future liabilities of the corporation, also has the infinitely interesting (to an employer) effect of eliminating health insurance for retirees, a thing which will come back to haunt us in higher Medicare taxes and spending any day now,
3 - reduced contributions to health insurance,
4 - reductions in other benefits such as sick days.

The frog’s been getting boiled very slowly for quite some time now. Part of the reason for the frenzy of speculation, first in the stock market, and now in real estate, is a search for something, anything, that will replace the loss of the above.
And of course, as was pointed out already, contract workers have none of these benefits at all, and they have zero job security to boot. The icing on the cake is the foreign workers who even now are still being deliberately imported to do the technical work that was pointed out above. So now, even getting an education is increasingly getting you nowhere, especially if you’re young and anything less than an Ivy League graduate with good grades.
At some point, the rebellion against all of this is going to boil over big time. I used to think it would be later, but unless things start to radically improve soon, it might start in the next couple of years.

48

So what if you know about some guy who’s business is expanding? Who’s really dealing in anecdotes here?

49

BTW, the above comes from the site I mentioned above from the BLS that gives the current employment situation.
One more time, just in case:

http://www.bls.gov/news.release/empsit.nr0.htm

50

I think that the frog being slowly boiled should be changed to a frog in a blender.

This article about pensions and how accounting rules perpetuate some of the sleight of hand that is going on today only serves, IMHO, to illustrate how rosy a picture is presented about the US economy, and yet how truly full of thorns it is.
http://www.ohio.com/mld/beaconjournal/business/5662573.htm

Is this a great country, or what?

51

Don’t expect this anytime soon, say in the next 25-50 years. The dumbed down and deskilled general population isn’t hurting enough. The average American is too easily hoodwinked into believing all is well, it doesn’t really affect them (yet), the politicians will change the subject, the media will find something banal to report, etc.

Of course, if Bush gets his extreme way with federal workers and up to a million lose their jobs come October, crank up that heat under the frog to very high overnight.

52

Are you talking to me? Forgive me, I’m used to standard Usenet etiquette here. In any event, no, my personal anecdotes mean nothing, which was entirely my point.

So, your point is that there has been an at least a 20% decrease in industrial equipment manufacturing, electronic equipment manufacturing, and aircraft manufacturing over the past few years? And this implies a new Great Depression? I’m trying very hard to pin us down to a falsifiable position, or at least a position that I understand well enough to either agree with or can argue against. So far, what I’ve got is “things are okeydokey” and “things are pretty rough, and you ivory tower eggheads are too dim to see it 'cause you’re all employed.” I’m also still getting a lot of assertions such as the following:

Without data, I can’t tell just what significance all of this has. Is this generally true? I’m sure it is. But without hard data telling me “average health insurance contributions have declined by X over the past twenty years” I don’t have anything to go on one way or the other, and have to rely on good old-fashioned guessing, which is hardly adequate for a truly “Great Debate.”

53

OK, then a few figures.

In 1934, the commission on unemployment compensation recommended a maximum payment of $15 per week. http://www.ssa.gov/history/reports/ces5.html

According to one of the many inflation calculators on the web, $201.71 in the year 2002 has the same “purchase power” as $15 in the year 1934. http://www.eh.net/hmit/ppowerusd/dollar_answer.php

The maximum payment for unemployment compensation in Michigan (the first state I could find figures for) in 2003 is based on 90% of the state average weekly wage is $653.00.
http://www.michigan.gov/bwuc/0,1607,7-161-15499_15500-58561--,00.html

So the unemployment benefit per week is something over three times higher in constant dollars.

So your point here -

is simply wrong.

And this one -

is also demonstrably wrong.

Using a constant measure of poverty, the poverty rate went down under Reagan.
http://reagan.webteamone.com/poverty.html
It went from 14.0% in 1981 to 12.8% in 1989. Interestingly, since you seem to like to compare absolute totals, the number of persons living in poverty in 1981 was 31.8 million. In 1989, it was 31.5 million, despite a population increase.

Regards,
Shodan

54

Some Indian economist wrote the book:

THE CRASH OF 1990

Of course that was before the WWW and internet boom so maybe he was just a little over 10 years off.

We now have the problem of computers more powerful than most people can figure out what to do with. I think we could theoretically have a computer bust. My fastest machine is 533 Mhz and have no forseeable plans to upgrade. Maybe I will when I can get a used 2 Gigahertz for $200.

Dal Timgar

55

desdinova, I would expect an economist to have this data at his/her fingertips. I’m not sure whether to be disappointed or not, but it sure gives me a new perspective on the old jokes about economists.
For the cash benefits conversions, there’s the following:

From the boys at the bls, of course, over at http://www.bls.gov/ncs/ebs/cashbalance.htm

The above data doesn’t come as a surprise to me at all. Why you’re throwing up this stone wall is beyond me.
There’s lots of stuff out on the web about how this affects workers 40 & over. Take a look.

On 401(k) contributions:

from http://www.redding.com/news/business/past/20030404bus008.shtml

For the rest of it, you’ll have to do your own research. Being an economist and all, that should be easy, right?

56

That would be Ravi Batra. He’s actually an American economist, although most economists think his work is bunk.

Since the whole basis of his book was that depressions come in 30 and 60 year cycles, being off by at least 13 years would be a problem.

57

I’ve heard 'em and told 'em all :wink: My primary background is in econometrics and urban economics, mainly the latter. Anyways, you still haven’t told me if your previous point was that
“there has been an at least a 20% decrease in industrial equipment manufacturing, electronic equipment manufacturing, and aircraft manufacturing over the past few years? And this implies a new Great Depression?”

I’m certainly not shocked either. As I said before, I’m quite sure your assertions are generally true. What I need is hard data, and you’ve now furnished the cite to support your assertion.

So, now, your points seem to be that
1.) Those covered by a defined benefit plan have declined from 32% of full-time private industry workers to only 22% in 2000.
2.) Among those with a defined benefit plan, the percentage with (inferior) cash accounts plans increased from 4% in 96-97 to 23% in 2000.
3.) Employer matches to 401(k) plans have decreased from 3.3% in 1998 to 2.5% in 2001.

So, these are your points, and you use them to conclude that we are, or are heading towards, a depression of severity comparable to the Great Depression? There’s a whole lot of sound and fury here, but I’m having great difficulty divining exactly what your point is.

As a reminder, here’s mine: current economic conditions are not even nearly comparable to the 1930’s, and I seriously doubt we are headed toward anything like that. I’m basing this primarily on per capita GDP growth (as well as per capita personal income growth), coupled with modest unemployment rates and relatively flat consumer spending levels.

Are times significantly worse than they were four years ago? Damn straight, of course they are, and as usual economic turmoil has hurt the poorest the most. I know as well as you do this sucks, half of my work involves low-income housing. But it’s just not as bad as 1933, I believe.

You’ve been here long enough to know that’s not how it works. You make an assertion, you do the research to cite it. The onus is completely and entirely on you.

58

You acted as if they’re not facts, which as you can see, they are.
As for whether or not it would happen this year: if you go back & look at the context, it was in the part about the “frog being boiled slowly”.
So I hardly think we’ll get there this year. That was never my point. It was my point that the frog that was being boiled ever so slowly might just start to notice a bit earlier than I thought if the guys turning up the heat didn’t lay off for a little bit. But subtlety doesn’t seem to be a trait of the suits in the executive suite these days, judging by Enron, Worldcom, Global Crossing, Adelphia, American Airlines, JP Morgan, and all the rest of the guys who either raped their employees or facilitated the rape of said employees, and are completely shameless about flaunting the resulting riches.
I’ve been planning for a depression around 2015-2020, myself. I just might have to speed up my contingencies if the current situation continues, however. It has been an unusually long slowdown, after all. Flexibility in one’s plans is always wise.

59

Nope. I don’t know how I “acted” but what I wrote was this:

Inflection is hard to tell from text, of course. But I have absolutely no doubt in my mind that, in real terms, the majority of workers are worse off today than in 1998. Employment is down, especially in manufacturing and industrial sectors, workers are often forced to accept pay cuts, benefits are down, I’m an economist but I’m not completely blind :stuck_out_tongue:

Your prognosticating device is a lot better than mine is, I’m wary of forecasting the next fiscal quarter! But here’s desdinova’s shoot from the hip guesstimation for the next twenty years: I think technological development is to the point where fully developed industrialized economies (i.e., the U.S.) can produce enough goods to maintain a moderate standard of living for every man, woman and child in the economy. Enough food to ward off starvation, a roof over your head and basic medical care such that you don’t die of the flu. Thanks to higher productivity, we can produce butt-loads of crap. And over the next twenty years, I don’t see any possibility of getting to the point where the per capita real gross domestic product, the sum of every single thing we make divided by the total population, is less than it was in 1933.

The relevant question, of course, is how will we distribute it? I dunno. A time series of Gini coefficients might give me a clue, but this is a far tougher thing to forecast. I’d be just as accurate forecasting the World Series in 2042 without even knowing what teams will exist then. But of course, the point is that even if per capita GDP is significantly higher in 2018, it’s no guarantee that the majority of people will then be better off than they are today, or even in 1933.

At the same time, however, I have very little faith in any kind of “people’s revolution.” Western Europe’s economies have sucked for the better part of a decade or longer, and still blow chunks compared to our (by our, I mean U.S.) economy, and there haven’t been any serious uprisings of the proletariate that I know of. In fact, I think one can look at Western Europe for an example of how a modern economy deals with prolonged “economic slow-down.” My analysis is a resounding and scientific “meh.” :stuck_out_tongue:

60

Personally, I’m not much for gross historical analogies. It’s easy enough to find major differences between the 1930s and our own day. But that doesn’t mean our economy isn’t facing some seriously bad karma. I thought I’d these two links might add something to the discussion. This article is one of the most depressing things I’ve read about the economy yet; this Krugman column is more polemical but makes reference to the article.