A key bit of history to understand today
Posted by Charles II on June 3, 2011
Paul Krugman pointed out a very important article if one wants to understand the high unemployment of today.
Solid line: Employment, counting people working for, e.g., the WPA as unemployed (!) Unemployment 25%–>15%
Long dashes: Employment, counting people working for, e.g., the WPA as employed. Unemployment 23% –> 10%
Dots: Private non-farm jobs. Unemployment 30%–> 15%
So, New Deal policies reduced unemployment by about 1% per year by any measure, and employed about 5% of the workforce in projects like the WPA from 1932 on. But because the 1937 recession, brought on by conservatives much like the idiots in charge of the Congress, caused unemployment to rise by about 5%, the solid line looks less impressive than the others. This is what Republicans use to argue that the New Deal didn’t work.
But there’s another point to consider. How quickly can the economy absorb jobs after an extended recession? In a short-lived recession, guys are laid off, but plants remain intact. So, they be brought back to work very quickly. In a longer recession, skilled people move away to find new jobs, and plant equipment may be sold off. It is much, much more difficult to get things started again. There have only been three economic dislocations in modern economic memory that qualify: the Great Depression, the Reagan Recession of 1981, and the Dubyan Recession of 2008. In the Great Depression, as the graph shows, the rate of re-employment prior to the 1937 recession was about 2.5-3% annually. If one takes a more conservative approach, and assumes that the 1937 recession was a natural pendulum swing, then re-employment took place at about 1% annually.
As one can see from this graph, re-employment during the 1982 recession was 2% annually (although it left unemployment stuck at very high levels), while the current rate of re-employment is projected to be less than 1% annually–and that may be optimistic.
The New Deal worked. The Geithner-Summers-Obama plan has not. The difference, really, is the number of people employed by government stimulus.
3 Responses to “A key bit of history to understand today”
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jo6pac said
Pretty amazing but as we head into the rest of the yr with cities, counties, states, corp. and the feds laying even more workers off it isn’t going to get any better any time soon. They all seamed hell-bent on finishing off what’s left of the middle class and with no original thinkers in charge I’m afraid we are all about to become serfs. You’ve probably have already seen this, interesting anyway.
http://www.nakedcapitalism.com/2011/06/michael-hudson-replacing-economic-democracy-with-financial-oligarchy.html
Charles II said
I hadn’t seen Hudson’s piece, but there’s no question that the only way out of the financial crisis is to tell the very wealthy to p— off. It’s gone past the point where a Warren Buffett or William Gates Sr. can say, “I should be paying more taxes.” If they care, they should expend their fortunes in exposing the lies that are keeping the oil barons and the investment banks in control. Otherwise, they too will go down as collaborators with those who destroyed America.
Phoenix Woman said
A-yep.