You Put Your Hands Upon My Hip
Then you dip, I dip, we dip! All this talk of a possible “double-dip” recession got me thinking: Have we ever faced something so economically scary? It turns out we have. Many times.
Considering it has been 26 months since the current anemic recovery began, and fingernails are getting shorter with each new report on the economy, I checked for recessions in the US separated by less than 30 months:
- Depression of 1807-1810 followed by recession of 1812
- Recession of 1812 followed by depression of 1815–1821
- Depression of 1815-1821 followed by recession of 1822-1823
- Recession of 1822-1823 followed by recession of 1825-1826
- Recession of 1825-1826 followed by recession of 1828-1829
- Recession of 1833-1834 followed by recession of 1836-1838*
- Recession of 1836-1838* followed by recession of 1839-1843*
- Recession of 1839-1843* followed by recession of 1845-1846
- Recession of 1845-1846 followed by recession of 1847-1848…
*Taken together, these 6 years represented the longest Depression in history following Jackson’s short-lived pay-off of the debt.
Well, you get the picture. It goes on and on like this until the 20th century. Since the Great Depression ended, there have only been two instances of recessions recurring in a time frame less than 30 months. The first occurred as an 8-month recession lasting into 1958 was followed by a 10-month recession beginning in 1960. The second one is more interesting, though, given its similarity to the current circumstances.
The president residing over the downward turn in the economy inherited a terrible economy with little time for things to turn around as his precedent had only replaced the Fed Chairman, and thus monetary policy, 18 months before he took office. When things are a mess it takes a while to turn it around. This is why he decided to keep the preceding executive’s Chairman and policies like Obama did following his election when there had been only 6 months action before taking office since the “Great Recession” was not even acknowledged until nearly a year after it began.
Unemployment was a little higher in the 2nd double-dip recession of the century than it is today, but still close enough to call it apples to apples. The country faced high energy prices and crises overseas, though no declared war, and government regulation of business was a center issue. American manufacturing faced a crisis and a government bailout was required to save the automobile sector.
If you haven’t guessed already, the last double-dip recession occurred under Ronald Reagan. Following the 6-month recession of 1980, Reagan entered office & decided to keep Carter 1979 appointee Paul Volcker, who had been implementing a plan of deregulation under Carter to nurture the economy away from approaching calamity. He also took a lot of heat for raising the federal funds rate to attack stagflation. In the end, his efforts worked to curtail inflation from a peak of 13.5% under Reagan in 1981 to 3.2% by 1983 and interest rates would follow it back down.
It took more than 3 years for Volcker policies to have enough impact to pull the economy into an extended recovery. Reagan decided to make a change in 1987 when Volcker thought deregulation had gone far enough and moderation was needed. That August he named Allen Greenspan, who was friendly to Reagan’s approach of removing most forms of regulation, Chairman of the Fed.
Three years later, the first George Bush was dealing with a recession of his own.
They are Us: Protecting Our Plutocracy
Robert Frank claimed in an article published on the first day of this month in the Wall Street Journal “…that the U.S. is becoming a Plutonomy—an economy dependent on the spending and investing of the wealthy.” I happened upon the Yahoo publication of the articlewhile finishing my recent entry on the 5th estate and invite you to read it. Should we worry our democratic nation is in danger of falling to the domino effect of an economy at the mercy of a small minority? After all, even if the economy falls into the care of the wealthiest 2%, they would still need to control the gates of political office for governance and have access to a viable military force. I’m here to tell you to stop all of the unnecessary worrying. It’s already happened.
Cracks, Crises and Cynicism
Opportunists follow any crisis. Here in Florida, for example, we witness price gouging after a hurricane and government efforts to penalize those unscrupulous few who take unfair advantage. Effective more in pleasing political constituencies than actually preventing gouging, market conditions are the ultimate deterrent. Who will do business with them after the crisis? What really should grab our attention in a crisis are systemic cracks in the foundation, those things fundamental to our system to which we pay little heed until we find ourselves trapped in the force of a storm surge. The wider the surge, the less we notice.
Politicians often find time during an election cycle to decry special interest groups and their influence on their more pliable peers who are typically members of the other party. If asked why they didn’t vote for the campaign finance reform bill, expect to hear the bill introduced would have the opposite effect while their efforts to produce a strong measure went ignored. It was no surprise when Sarah Palin said Obama received the largest contributions from BP, nor that both parties have members—including Palin—supported by BP and other corporations within the oil industry. Why wasn’t anyone shocked? We, the people, accept it as the cost of doing business in politics. The theatrics in a campaign are a cyclical event of denial and suspension of disbelief. Party candidates rally their constituencies with ideologically correct platitudes while the party faithful respond with convincing cheers. All the while, financiers still direct the action backstage with the actors entering and exiting on cue. Occasionally, a script revision is required and a promising understudy steps into the lead role. With the fanfare of a high school yearbook, the voter resigns their vote to the candidate “most likely to win.”
Nation Branding: “What, me worry?”
Why worry if corporate America has their hands in shaping the pool of viable candidates for public office? Seriously. Let’s take the “boogeyman” label off faceless corporations for a moment, and consider the evolutionary processes inherent in a capitalist economy. The best and strongest innovations are rewarded with greater market share. This formula should work well for a nation in a global economy where its brand matters. Different emotions are stirred by the words “Made in the USA” or “Made in China,” and these brands need to be defended vigorously. National defense also benefits from competition.
After the Cold War, industry supplanted competing Superpowers. Mercenaries—hired combatants—have been around since the birth of our country and fill a role when troops are scarce. Today we call them private military companies (PMCs) and their combatant activity has increased tenfold since the Persian Gulf War. This might sound a few alarms, but think about it: If the government wages war and there is a way to reduce reportable excess costs and casualties to an American public that doesn’t want to hear it, isn’t this a win-win situation? Private companies means private casualty reports, a kind of “don’t ask, don’t tell” policy all their own. Those working in this industry are usually well-trained former military personnel from all over and expect a market price for their services. Our pool of applicants increases considerably. It’s probably best for US military personnel we don’t compare salaries. Oh, and before I forget, don’t let on that different rules apply to contractors vs. military vs. the civilian population. Abu Ghraib and Order 17 are best not discussed in mixed company.
I don’t want to give the impression there are highly trained combatants with top-of-the-line weaponry out there without some affiliation and commitment to the good ol’ US of A. These guys walked our streets in New Orleans next to members of the US military helping to secure neighborhoods and bring relief following Hurricane Katrina. The companies for which they work–at least 17 of them, anyway–also give generously to candidates running for public office. The wheel keeps spinning round.
Speak Now or Forever Hold Your Peace
Frank’s observation can hardly be seen as revelation as the plutocratic argument has circulated in various threads, and if I’ve recognized it, clearly many other more knowledgeable folk have also. In fact, I believe most either have difficulty getting past ideological rhetoric or refuse to take the signs of plutocracy seriously. One careless comment—think of Obama’s “share the wealth”—and the soundbyte becomes the argument, and the eroding power of self-governance continues until the next crisis reveals more cracks in the foundation.
Capitalism is on the defensive. “Socialism” and “nanny state” are used as pejoratives to invoke fear of bigger government among conservatives. Both parties, however, voted to rescue corporations that support their campaigns when capitalism weeded them out for extinction. Our tax dollars went to salvage failed corporations instead of entrusting successful companies with the cash necessary to step up and fill the void effectively. They didn’t just abandon a free market democracy, they declared their affiliation with the companies of choice. Each successive Congress and President of either party has promised to reduce government, and each has overseen its growth.
If size matters, shouldn’t you be concerned who’s running it?
UPDATE : One Year Later
Though this chart only goes through 2006, I think it worth noting that in 2011, when there are deafening arguments against increasing taxes despite a weak economy, aging infrastructure & historically low interest rates and tax brackets, that the policies leading to this imbalance among socio-economic groups are still in place with no sign of abating. If Einstein was correct in saying the definition of insanity is repeating the same thing over and over again expecting a different outcome, I wonder what next year will bring?
Media Psychology: They are Us 