A good post from Brad DeLong, inviting us to consider what we have as compared to what those in other times and places had:
(Not so by the way, I'm not ascribing that belief to DeLong. If you read his post, you will see a certain ambivalence; he recognizes that many of us live better than any previous people could have hoped to, but acknowledges that it will be difficult for us "to ever say 'enough!' to stuff in general.")
This kind of thing sounds pretty compelling. I live in a pretty nice suburb, and I've railed in the past against those who, for example, pull up outside of the school or soccer field and keep their SUV engines running while waiting for Junior to finish up. If a small amount of hardship generates an increased sense of fiscal prudence, gets those motors off, saves some fossil fuel, I'm all for that. But....
Here's my prediction. I offer it with trepidation and admit it means nothing (it's probably as valid as that of most economists, but I concede it's a guess). I think we're going to go through 2 or 3 tough years, then emerge into an economy that will seem to be back on the right track. But we'll be poorer, with future commitments that will seem back-breaking.
What that will do is permit Americans fewer options. Right now, a young American looks at the opportunity set presented to them, and, in almost all cases, even the worst possible outcome is superior to the life in which he or she grew up. (The best, of course, is winning American Idol or Survivor and living out life on Easy Street.) You may become a CEO of a hedge fund and make untold amounts of money, but, even if you don't go quite that far, you'll still end up as an executive of a hot Internet company and make 6 figures, certainly better than Mom or Dad did.
My guess is that, for many, my scenario will no longer be true. The worst outcome will actually be pretty bleak. If you choose the wrong major, or can't afford to go to the right school, or your college roommate isn't connected, you could find yourself scrabbling along the back roads of commerce, desperately trying to retain a toehold as the price of your labor is bid down by people from overseas who find $6 an hour to be more than acceptable. Or you could actually do well, go to law school, and find yourself in that second tier of lawyers who tend bar on the weekends to make ends meet.
Now, one could argue that your simpler life will be a better one, more spiritual, more grounded in the simple joys. You may make only $30K, even with that $200K college degree you got, but you'll be a better person for it.
That may end up being true, I suppose. One could make the Brokaw-esque claim that the hardships of the Great Depression gave rise to "The Greatest Generation."
But here's what a lot of people miss. There were people ruined, utterly destroyed by the Great Depression. If we do end up a poorer nation with fewer opportunities for all, the people who are now at the margins will be disproportionately hurt. That's especially true if we allow laissez-faire to govern the way our new nation takes shape. Those with power will always find ways to retain as much of the bounty as they can; when there's a lot to go around, that might be acceptable. However, when opportunities grow more scarce, unequal distribution will be a disaster to those who already have too little.
A simplistic illustration: DeLong cites the example of Adam Smith's Wealth of Nations. When it came out, in 1776, the average British family could only afford to buy 17 copies from their entire annual income. Nowadays, an average American family can afford 6,000.
I used to buy quite a few books, many for work purposes, but quite a few just because I liked them. Now, as times are considerably tighter, I believe I bought just one all last year. I really can't buy fewer. That's a problem for me, but it's also a problem for anyone whose existence depends on the sale and distribution of books. To say we can give up 5% or 10% or whatever, and not feel it, is incredibly dependent on where we currently are. I hope policymakers remember that.
The current recession may turn into a small depression, and may push global living standards down by five percent for one or two or (we hope not) five years, but that does not erase the gulf between those of us in the globe's middle and upper classes and all human existence prior to the Industrial Revolution. We have reached the frontier of mass material comfort—where we have enough food that we are not painfully hungry, enough clothing that we are not shiveringly cold, enough shelter that we are not distressingly wet, even enough entertainment that we are not bored. We—at least those lucky enough to be in the global middle and upper classes who still cluster around the North Atlantic—have lots and lots of stuff.His point is well taken, that for many of us life is pretty good when put into historical perspective. But there's also a sense that this borders on the thinking of those people who believe a deep recession will somehow be cleansing, that it will force Americans to "get back to basics," to focus on the non-material things that make life worth living, that we should actually embrace the thought of a long economic downturn. These folks believe that survivable hardship will improve us morally.
(Not so by the way, I'm not ascribing that belief to DeLong. If you read his post, you will see a certain ambivalence; he recognizes that many of us live better than any previous people could have hoped to, but acknowledges that it will be difficult for us "to ever say 'enough!' to stuff in general.")
This kind of thing sounds pretty compelling. I live in a pretty nice suburb, and I've railed in the past against those who, for example, pull up outside of the school or soccer field and keep their SUV engines running while waiting for Junior to finish up. If a small amount of hardship generates an increased sense of fiscal prudence, gets those motors off, saves some fossil fuel, I'm all for that. But....
Here's my prediction. I offer it with trepidation and admit it means nothing (it's probably as valid as that of most economists, but I concede it's a guess). I think we're going to go through 2 or 3 tough years, then emerge into an economy that will seem to be back on the right track. But we'll be poorer, with future commitments that will seem back-breaking.
What that will do is permit Americans fewer options. Right now, a young American looks at the opportunity set presented to them, and, in almost all cases, even the worst possible outcome is superior to the life in which he or she grew up. (The best, of course, is winning American Idol or Survivor and living out life on Easy Street.) You may become a CEO of a hedge fund and make untold amounts of money, but, even if you don't go quite that far, you'll still end up as an executive of a hot Internet company and make 6 figures, certainly better than Mom or Dad did.
My guess is that, for many, my scenario will no longer be true. The worst outcome will actually be pretty bleak. If you choose the wrong major, or can't afford to go to the right school, or your college roommate isn't connected, you could find yourself scrabbling along the back roads of commerce, desperately trying to retain a toehold as the price of your labor is bid down by people from overseas who find $6 an hour to be more than acceptable. Or you could actually do well, go to law school, and find yourself in that second tier of lawyers who tend bar on the weekends to make ends meet.
Now, one could argue that your simpler life will be a better one, more spiritual, more grounded in the simple joys. You may make only $30K, even with that $200K college degree you got, but you'll be a better person for it.
That may end up being true, I suppose. One could make the Brokaw-esque claim that the hardships of the Great Depression gave rise to "The Greatest Generation."
But here's what a lot of people miss. There were people ruined, utterly destroyed by the Great Depression. If we do end up a poorer nation with fewer opportunities for all, the people who are now at the margins will be disproportionately hurt. That's especially true if we allow laissez-faire to govern the way our new nation takes shape. Those with power will always find ways to retain as much of the bounty as they can; when there's a lot to go around, that might be acceptable. However, when opportunities grow more scarce, unequal distribution will be a disaster to those who already have too little.
A simplistic illustration: DeLong cites the example of Adam Smith's Wealth of Nations. When it came out, in 1776, the average British family could only afford to buy 17 copies from their entire annual income. Nowadays, an average American family can afford 6,000.
I used to buy quite a few books, many for work purposes, but quite a few just because I liked them. Now, as times are considerably tighter, I believe I bought just one all last year. I really can't buy fewer. That's a problem for me, but it's also a problem for anyone whose existence depends on the sale and distribution of books. To say we can give up 5% or 10% or whatever, and not feel it, is incredibly dependent on where we currently are. I hope policymakers remember that.
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