Monday, January 4, 2010

It was the worst of times

McClatchy News -

Looking back over the last 10 years, it's hard not to feel as W.H. Auden did one dreary September day in 1939:

"I sit in one of the dives

"On Fifty-second Street

"Uncertain and afraid

"As the clever hopes expire

"Of a low dishonest decade."

Still, if we're looking for a literary progenitor for the era now past, it would not be Auden but Herman Melville's "The Confidence-Man," for these were the years of the great con and the sweeping swindle. From Bernie Ebbers and WorldCom to Jeff Skilling and the Enron boys, to Bernie Madoff's Ponzi scheme, to the bait-and-switch that Bush and Cheney used to take the country into war, this was the decade of deception.

No deceit was more malevolently corrosive than the fiction that this was a period of expansive prosperity in which significant numbers of our people were able to share in the American dream of financial security. All the triumphalist rhetoric emanating from Wall Street and the White House notwithstanding, this was - materially speaking - a disastrous decade for U.S. families.

For the first time since World War II, according to the departments of Commerce and Labor, an average American's net worth actually fell - by a whopping 13 percent. By way of comparison, and to demonstrate just how anomalous such a decline is, consider that net worth grew 44 percent in the 1990s; 35 percent in the 1980s; 12 percent in the 1970s (even with the Carter administration's "stagflation"); 25 percent in the 1960s; and 26 percent in the 1950s.

The employment picture was no better. Though the U.S. population has grown by 35 million since 2000, employment has increased just 0.5 percent over the last 10 years. For the first time since the federal government began keeping such statistics, the number of private sector jobs actually declined. (In both the 1980s and 1990s, employment grew by 20 percent, and in the 1960s it climbed by 31 percent.)

Meanwhile, as the private sector's flight from its pension obligations became virtually general, tens of millions of Americans were compelled to trust their retirements to the equity markets through 401(k) accounts. It was a bonanza for Wall Street, which raked in commissions and fees, and a disaster for working families, because the decade ended without any gains in the stock averages.

A tiny minority of insiders and the privileged, on the other hand, did very well for themselves. According to economists Emmanuel Saez of Berkeley and Thomas Piketty of the Paris School of Economics, the highest-earning 0.1 percent of Americans accounted for 8.2 percent of the country's total pretax income. That's the highest concentration of wealth since 1917.

Former Clinton administration Secretary of Labor Robert Reich recently pointed out that all these factors combined to play a major, but largely unrecognized, role in the current financial crisis. Even though most American families had two working adults throughout the last decade, many had to borrow simply to maintain their standard of living. People maxed out their credit cards and tapped their home's equity - something that proved catastrophic when the value of houses collapsed.

With incomes and employment stagnant, families had nowhere to turn. Not so employers. While most lacked the managerial creativity to grow their businesses, they found a way to keep profits up by laying off huge numbers of people and simply working those who remained - too frightened to protest - harder. That accounts for the striking productivity gains recorded over the past several quarters. The sputtering economic recovery now underway essentially is a 21st century version of the old-fashioned speedup.

Democratic Party executives from President Obama to Mayor Antonio Villaraigosa have said that their priority for the year ahead is to create good jobs that pay decent wages. As the experience of this deceitful decade demonstrates, the need never has been more urgent.