Economist Joseph Stiglitz and the Book of Jobs

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joblessgamesMEDIA ROOTS  Although the corporate media touts an improving economy, U.S. citizens continue to suffer cruel economic punishment and austerity.  Millions of citizens still search for employment, and the typical income of a U.S. household is less now than it was in 1997.  Why is the economy not improving?  Wall Street makes an easy target for the ire of struggling workers, but is there a deeper, more complex reason why the economy creaks, tumbles and rolls like an outdated galleon laboring in rough seas?

Economist Joseph Stiglitz offers in-depth analysis of the weakening foundation of the U.S. economy.  In the years leading up to 2008, U.S.A. lived in an easy-credit, fast-money mania, fueled by wildly inflated home values, corrupt appraisers, and financial gimmicks.  However, the integrity of the economy was compromised even before the meltdown, explains Stiglitz.  Our collective economic livelihood had been dealt a slow acting, poisonous blow long ago, as other observers such as Catherine Austin Fitts and Dr. Michael Hudson have described. 

Stiglitz draws insight comparing today with the tumultuous Great Depression, which had been well underway for years before the banking sector crashed.  What brought about the economic paralysis?  The primary cause was a quiet, but massive, transition away from an agriculture-based economy.  As food production modernized and became more efficient, less farmers were required to grow the food necessary to feed the U.S.  Suddenly, a vast portion of the U.S. workforce became obsolete through automation. 

Stiglitz argues broad changes must be made in tandem with large, concentrated investment.  As once industrious manufacturing regions of U.S.A. wither and rust, elected officials neglect investment in education, research, and infrastructure, favoring austerity cuts.  Yet, these three areas provide opportunities for healthy economic growth and future employment, as the nation struggles to adapt to the 21st century.  Addressing these needs, perhaps, U.S.A. can fulfill its promise of greatness and prosperity.

MR

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VANITY FAIR Even when we fully repair the banking system, we’ll still be in deep trouble—because we were already in deep trouble. That seeming golden age of 2007 was far from a paradise. Yes, America had many things about which it could be proud. Companies in the information-technology field were at the leading edge of a revolution. But incomes for most working Americans still hadn’t returned to their levels prior to the previous recession. The American standard of living was sustained only by rising debt—debt so large that the U.S. savings rate had dropped to near zero.

And “zero” doesn’t really tell the story. Because the rich have always been able to save a significant percentage of their income, putting them in the positive column, an average rate of close to zero means that everyone else must be in negative numbers. (Here’s the reality: in the years leading up to the recession, according to research done by my Columbia University colleague Bruce Greenwald, the bottom 80 percent of the American population had been spending around 110 percent of its income.) What made this level of indebtedness possible was the housing bubble, which Alan Greenspan and then Ben Bernanke, chairmen of the Federal Reserve Board, helped to engineer through low interest rates and nonregulation—not even using the regulatory tools they had. As we now know, this enabled banks to lend and households to borrow on the basis of assets whose value was determined in part by mass delusion.

The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to “where it was” does nothing to address the underlying problems.

The trauma we’re experiencing right now resembles the trauma we experienced 80 years ago, during the Great Depression, and it has been brought on by an analogous set of circumstances. Then, as now, we faced a breakdown of the banking system. But then, as now, the breakdown of the banking system was in part a consequence of deeper problems. Even if we correctly respond to the trauma—the failures of the financial sector—it will take a decade or more to achieve full recovery. Under the best of conditions, we will endure a Long Slump. If we respond incorrectly, as we have been, the Long Slump will last even longer, and the parallel with the Depression will take on a tragic new dimension.

Until now, the Depression was the last time in American history that unemployment exceeded 8 percent four years after the onset of recession. And never in the last 60 years has economic output been barely greater, four years after a recession, than it was before the recession started. The percentage of the civilian population at work has fallen by twice as much as in any post-World War II downturn. Not surprisingly, economists have begun to reflect on the similarities and differences between our Long Slump and the Great Depression. Extracting the right lessons is not easy.

Read more about America’s 21st Century Job Engine.

© 2012 Vanity Fair

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Photo by Flickr user clementine gallot

2 thoughts on “Economist Joseph Stiglitz and the Book of Jobs

  1. that stocks ecunobd back from a nearly 700 pt drop and there are serious slides this week but it isn’t the worse one we have had.128 point loss is steep but it is much better than the 700 that it was.The liberals running around yelling the sky is falling the sky is falling is part of the reason for this they are in a panic and DEMANDED a bailout which is only a bandaid. It might get worse but we are ok. The WHOLE WORLD is experiencing the same thing right now .so the world won’t crash!Not to say it isn’t serious .it is I do believe the government will handle this .and solve it eventually!BAD NEWS If OBAMA Is in though .and we will never hear the end of it that it was the republicans but it is the democrats CLINTON did this .don’t be fooled into thinking different. You can’t make money like we did back then and not pay for it now. IT was AMAZING the money we made during Clinton years but it was a false bottom a bubble under false economy and we were in a recession when Bush took office ..but no one says anything about THAT!There was a crash in 1970 too ..Look at history a recession is on average at this time .we go in cycles and we have ALWAYS corrected the situation within two years.Remember too this is a good thing that this weekend is a holiday weekend and all markets are closed hopefully people will step back and take a second look. We are living the housing bubble 45 percent drop right now that is a WHOLE LOT OF LIBERAL caused problems from Clinton !Stock is a sliver of a market based on earnings .companies are going to earn 40 percent less but not all companies are going to go out of business right now ..we are not going to go down.Companies are trading at muliti million dollar lows right now so that means we are going to go up! It will take time..!Just DON’T PANIC!!!!!!! We are senior citizens and we are worried about our 401 K’s and stocks and we have taken a huge hit but we have done this before and it went up before and it will go up again.You cannot solve 30 years of unwinding credit being defaulted in just a few days.Not ONE BANK has lost ONE person’s FDIC money .so it is really not THAT bad yet! Oh and please stop listening to the news ..they can give you facts but they are also VERY NEGATIVE! That is their business to report everything they have 24/7 to cover news and they are fighting for time! So the most outrageous they get the more viewers they get.

  2. Stiglitz is an honest broker and ALWAYS a good read and resource for info regarding TRUE economic happenings and understandings! His book ‘How to make Globalization Work’….is also vreat insight to the TRUE powers that run this country and world!
    PEACE and KickAss All!!!Allocated –

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