2009-07-11: Economy: The Numbers Lie
The true measure of a nation's economy is in the workplaces, homes, and lives of average, ordinary people, those in the middle of the economic scale. It is not in aggregates that pack multi-millionaires and billion-dollar corporations into the numbers.
Why do I mention this? Because the government and the mainstream media act as though only large businesses and their managers truly matter. When large banks like Citibank got into trouble because of bad real estate loans, no one really tried to help those who'd been suckered in by the "refinance your home to pay off your bills" and similar come-ons--at least not for their own benefit--instead the focus was squarely on saving the banking system's largest and most poorly-run institutions.
Now the crisis is over. Individuals and families are still suffering, and will continue to suffer for the next year or two, but the biggest banks are profitable again and investors are no longer panicking. The MSM, acting as the propaganda voice of the political and corporate elite, is telling us that the whole thing is over. But is it?
Are individuals and families benefiting from more wide-spread employment yet? Remember that consumer spending is about 68% - 70% of our GDP. This is the same GDP that, according to ShadowStats.com's chart below, has fallen about 5% in the first half of 2009. Consumer spending is severely limited without increased employment, so a quick turn-around is not likely. Another way to look at it is to compare inflation-adjusted per capita income for the middle class over time. However, it is perhaps easier, if less accurate, to use the aggregate per capita income numbers. [XLS file]
I submit to you that the depression-recession is both worse and better than what you have heard on television. It is worse, because the government's figures were altered to make things look better than they really are (the most recent time this happened was during the Clinton administration, but they were hardly the first). So when government figures say that 15% of the workforce is unemployed once you include "discouraged workers", the true number could top 20%. When government figures say that the inflation rate is -2% annualized, it could actually be 6% annualized When government figures say that GDP is on track to drop by 2% this year, it could actually be working toward a 5% drop this year.
I honestly think more people are jobless, homeless, and hopeless than the published reports let on. I think the hype about the failing banks scared a lot of people, especially employers and managers, who reacted by cutting a lot of staffers loose. Creditors reacted by becoming hyper-aggressive in their collections activities, canceling accounts, raising interest rates, and changing their terms to be even more onerous and oppressive than they already were. And this knocked a lot of people who were in borderline financial situations into the seriously distressed camp.
On the other hand, the reason the government and the media are panicking isn't because Mr and Ms Average American are hurting. It is the financially above-average that own most stocks and bonds and which support most political organizations, including both major parties and pressure groups like Greenpeace and the US Chamber of Commerce. When those contributors are hurting, they can generate a lot of interest from the broadcasters and from various political pressure groups. When someone said the banks were about to melt down, the whole elitist apparatus freaked out, and that's what the government reacted to. This means that things very likely did not change that much for those of us in the average and below-average income groups.
Sadly, it seems that the economy isn't declining as precipitously as it was. Not that I want it to decline, but such a decline is necessary to erase the accumulated destructive effects of the past twenty or thirty years, effects such as the still-inflated real estate pricing and the low savings rate, the import-over-domestic orientation in purchasing, and the exaggerated influence with our government that large corporations have relative to that of individuals and smaller businesses. Unless these things are fixed, this little recession is just a foretaste of what lies ahead for us. I do not want us to go through a similar time. I would rather see the economic and political deadwood cleaned out and both our economy and our political system rebalanced with a stronger emphasis on individuals, small groups, and small businesses, and a much-reduced role for bigger organizations and corporations, whether call themselves AARP or Xerox.
The one thing that is certain (all the rest is speculation) is that large corporate organizations (e.g., National Educators Assn or GM) have too much influence in our country, far in excess of their contributions. That is true whether we rely upon the pre-digested numbers that we get from the mainstream media or we use someone else's measurements.
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