Tuesday, September 30, 2008

Doom and Gloom, how bad could it get?

Reading around things at the moment there is a ton of doom and gloom. I have read multiple reports of the end of America as we know it, an ongoing depression that will end society as we know it. The party is supposed to be over, we will never be this wealthy again. This is alarming to me, so I went and found out what is the truth.
It is generally accepted that the Great Depression of the 1930's is as bad an economic time as we have had in modern times. The combination of debt, iliquid assets, a drought, government incompetence, a worldwide plague less than a decade before produced a worldwide economic downturn that lasted a decade. It seems to me that this is the worst possible scenario, and unlikely to occur as the world's wealth is more equally distributed, less concentrated in one area, much more technologically advanced, and economic theory and practice is greatly improved. But let us take The Great Depression as our worst case scenario.
Gross Domestic Product, what we were producing as wealth in the USA declined from a peak in 1930 of $800 billion in adjusted 1999 dollars to a low of $600 billion in 1934. A quarter of the economy went away, an absolute disaster. However, this catastrophic low simply put the economy back to producing the same amount as in 1922, basically putting production back to levels of a decade before. By 1936 the GDP of the USA was back up to the same production levels as it was in 1929, when everything was hunky-dory.
Now, since 1950 the USA GNP per capita has just about tripled. The USA produces three times as much wealth per person as it did in the golden age of the american culture. By my calculations, if the worst possible scenario of the Great Depression happens, and a quarter of our economic production is lost in the next three years, we'll be producing wealth on average at about the same rate as we did in 1990. The worst case scenario is that on average we'll be forced into a position as horrendous as 1990.
Now, clearly things are not that simple, but the great doom and gloom fear should not be about whether the USA will collapse as a nation in terms of wealth production. We all managed quite readily to live in the conditions of 1990, and we could certainly manage to do so for the single year that things would be that bad in terms of wealth production. There will not be a shortage of wealth in the USA, even under the worst conditions.
Does this mean that I am blase about the situation? Certainly not, but it does mean that I think the doom and gloom, end of civilization stuff is just out of whack. What is the problem here is not whether there is going to be enough money, it's how that money is distributed. The top 1% of americans in terms of wealth own the same amount of stuff as the bottom 95%. The problem is the divide in wealth, the inequality of its distribution. A billionaire losing his job, his income and a quarter of his wealth is fabulously wealthy and never needs to work again in his life. Someone with half a million in assets who loses their job and a quarter of their income will struggle to keep what they have, will have to be less fabulously wealthy for a while Those struggling to make their payments right now might face bankruptcy, homelessness, hunger.
But this problem is not new. The gap between the poor and the rich has been growing for twenty years now. We have known that tens of thousands of americans die every year because they don't have health insurance or the care they need. I've seen them die myself. Americans have done sweet FA about this for fear of socialism or fear for their pocketbook. There is little to no help for the homeless, which is why we see them walking around our cities. We worry more about unscrupulous thieves getting government money than about whether making the process of getting disability money is too hard for ill people (if I told you how hard it was to get disability money, you wouldn't believe me, you simply wouldn't). The actual problems that this financial crisis will cause are not new problms, they are not insoluble problems, they are the same problems that progressive people have been talking about for years. We need to clothe, shelter, educate, protect and heal everyone in this culture, everyone. We don't just need to do it when it might be someone we know.

If we have another Great Depression we as a country will still be three times as wealthy per person as Costa Rica is right now, but Costa Rica has a higher literacy rate, a higher life expectancy, a lower infant mortality rate than the USA. In other words, it isn't a question of money, it's a question of whether you care about the poor or not, because it is possible to care about the poor more than we do, even if the worst possible situation happens in the USA.

If you are worried about yourself, and what might happen to you I'll point out one thing. At some point in your life you almost certainly lived on half the amount of money you have right now. As a college student I lived on a tenth of my present income. I did it before, I even lived a life with fun and excitement in it, I can do it again. Seriously, billions of people in the world would swap their best chances of financial gain with your worst possible scenario. Buck up people, show a little gumption.

1 comment:

Unknown said...

Is there no end to your ramblings you incessant windbag? It's been since April and I see you've written War and Peace 10 x over. Doom and Gloom is just a shitty genre of music. Fields of the Nephilim fans should be well versed in such knowledge. Jesus Christ on a rock man...have a beer. Just make sure it's like a PBR or Red White and Blue and not some fanciful Newky Nut Brown or Traverse City Wheat beer with little bits and chunks floating about. The economy sucks ya know...save some scratch.