Dec 9, 2013
How Bad Things Are
Posted on May 14, 2012
By Paul Krugman
The following excerpt from Paul Krugman’s book “End This Depression Now!” was published with permission from W.W. Norton & Co.
In March 2009 Ben Bernanke, normally neither the most cheerful nor the most poetic of men, waxed optimistic about the economic prospect. After the fall of Lehman Brothers six months earlier, America had entered a terrifying economic nosedive. But appearing on the TV show 60 Minutes, the Fed chairman declared that spring was at hand.
His remarks immediately became famous, not least because they bore an eerie resemblance to the words of Chance, aka Chauncey Gardiner, the simpleminded gardener mistaken for a wise man in the movie Being There. In one scene Chance, asked to comment on economic policy, assures the president, “As long as the roots are not severed, all is well and all will be well in the garden. . . . There will be growth in the spring.” Despite the jokes, however, Bernanke’s optimism was widely shared. And at the end of 2009 Time declared Bernanke its Person of the Year.
Unfortunately, all was not well in the garden, and the promised growth never came.
To be fair, Bernanke was right that the crisis was easing. The panic that had gripped financial markets was ebbing, and the economy’s plunge was slowing. According to the official scorekeepers at the National Bureau of Economic Research, the so-called Great Recession that started in December 2007 ended in June 2009, and recovery began. But if it was a recovery, it was one that did little to help most Americans. Jobs remained scarce; more and more families depleted their savings, lost their homes, and, worst of all, lost hope. True, the unemployment rate is down from the peak it reached in October 2009. But progress has come at a snail’s pace; we’re still waiting, after all these years, for that “positive dynamic” Bernanke talked about to make an appearance.
And that was in America, which at least had a technical recovery. Other countries didn’t even manage that. In Ireland, in Greece, in Spain, in Italy, debt problems and the “austerity” programs that were supposed to restore confidence not only aborted any kind of recovery but produced renewed slumps and soaring unemployment.
And the pain went on and on. I’m writing these words almost three years after Bernanke thought he saw those green shoots, three and a half years after Lehman fell, more than four years after the start of the Great Recession. The citizens of the world’s most advanced nations, nations rich in resources, talent, and knowledge—all the ingredients for prosperity and a decent standard of living for all—remain in a state of intense pain.
In the rest of this chapter I’ll try to document some of the main dimensions of that pain. I’ll focus mainly on the United States, which is both my home and the country I know best, reserving an extended discussion of the pain abroad for later in the book. And I’ll start with the thing that matters most—and the thing on which we’ve performed the worst: unemployment.
The Jobs Drought
Economists, the old line goes, know the price of everything and the value of nothing. And you know what? There’s a lot of truth to that accusation: since economists mainly study the circulation of money and the production and consumption of stuff, they have an inherent bias toward assuming that money and stuff are what matter. Still, there is a field of economic research that focuses on how self-reported measures of well-being, such as happiness or “life satisfaction,” are related to other aspects of life. Yes, it’s known as “happiness research”—Ben Bernanke even gave a speech about it in 2010, titled “The Economics of Happiness.” And this research tells us something very important about the mess we’re in.
Sure enough, happiness research tells us that money isn’t all that important once you get to the point of being able to afford the necessities of life. The payoff to being richer isn’t literally zero—citizens of rich countries are, on average, somewhat more satisfied with their lives than citizens of less well-off nations. Also, being richer or poorer than the people you compare yourself with is a fairly big deal, which is why extreme inequality can have such a corrosive effect on society. But when all is said and done, money is less important than crude materialists—and many economists—would like to believe.
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