Lying to Ourselves About Catastrophic Economic Meltdown

Why Are We Lying to Ourselves About Our Catastrophic Economic Meltdown?

Posted by Arun Gupta, AlterNet at 2:00 PM on September 29, 2009

Sorry, it's not over yet. This downturn will be severe and long-lasting, and profoundly re-shape our lives, culture, society and the world.

Over the last year, the world has received a crash course in real-world capitalism as the follies of Wall Street nearly torpedoed the global economy, which had to be rescued by a trillion-dollar government handout.

Economics, the study of systems of production, distribution and consumption of goods and services, touches virtually facet of our lives from work, recreation and home life to entertainment, culture and social relations.

While there is a wealth of information and some excellent reporters in the business press, the mainstream media has botched virtually every major economic story over the last decade. It helped inflate the Internet bubble. It worshiped at the shrine of the free market and Alan Greenspan. It ignored the evidence of the housing bubble. It was missing in action on the commodities bubble. It celebrated billionaires and speculators even as they manufactured financial weapons of mass destruction. It only sporadically reports on the myriad ways Wall Street games the financial system.

Even now, the corporate media downplay the scope of the disastrous U.S. economy. The current economic downturn, the longest since the Great Depression more than 70 years ago, has been dubbed by many the “Great Recession.”

It's a useful way for journalists to acknowledge the pain of tens of millions of Americans who have lost homes, livelihoods, health care and more, while distinguishing the current misfortune from the Great Depression. But the term also makes the situation seem rosier than it is.

Despite the financial industry’s self-induced catastrophe in 2008, most corporate media reporting still assumes “What’s good for Wall Street is good for America.”

Federal Reserve Chairman Ben Bernanke has already said this recession is “very likely over.” The S&P 500 index, from its low point in March 2009, has rocketed upward by nearly 60 percent in barely six months. And Wall Street banks are reporting record profits, less than a year after taxpayers threw them a trillion-dollar lifeline.

But for the average household, the reality is grim. The number of unemployed and underemployed is nearly 17 percent of the U.S. workforce, or around 25 million people. Residential mortgage foreclosure filings have exceeded 300,000 a month for six months in a row, starting in March 2009. Tent cities are sprouting across the country. Personal incomes continues to shrink, and it’s projected that medical bankruptcies, people who file for personal bankruptcy because of medical bills, will reach 900,000 cases this year.

There is also little hope for a sustained recovery. Even if the recession technically ends in 2009, it’s only because of the (flawed) stimulus plan passed by Washington earlier this year.

One way to measure the gross domestic product is to divide it up in four segments: consumer spending, which is negative year over year; business investment, which is still in a recession; trade, or the value of exports minus import, which has been running a massive gap for years; and government spending, which has increased dramatically at the federal level while dropping precipitously at the local and state level. These factors are represented by the formula GDP = C+I+G+(X-M).

In simple language, there is no sector that appears capable of pulling the economy out of its deep funk: manufacturing has virtually disappeared in this country; most service sector jobs pay dismally; the tech sector and “creative industries” can’t employ tens of millions; those hopes of green jobs appear to vanished with Van Jones; and there are no more bubbles that can be pulled out of the Federal Reserves’ bag of tricks, at least ones that trickle down to Main Street.

It’s a distinct possibility that we may even see a double-dip recession, while the unemployment rate stays in the double digits for years.

The United States may be headed for a lost decade, like Japan experienced during the 1990s. It seems more fitting, then, to call this current downturn Depression 2.0.

This decline is not a re-run of the 1930s. After all, it’s the extreme right that is organizing around this downturn, not the left or labor as in the Roosevelt years. But it does appear like it will be severe and long-lasting, and profoundly re-shape our lives, culture, society and the world.

It’s going to be a rough ride, but information is the key to organizing for a better world.

Arun Gupta is an editor of the Indypendent. He's writing a book about the decline of American Empire to be published by Haymarket Books.