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Jeff Madrick on ‘High Wire,’ Peter Gosselin’s Look at the Economic Meltdown

Posted on May 2, 2008
book cover

By Jeff Madrick

(Page 2)

    Gosselin even makes a chapter on America’s poor sound original. The poor are not different—they are like you and me, he says, simply trying to make ends meet and get a life, especially for their kids, and even hold in their hearts a hope for the American dream. He finds conservative claims that we have conquered poverty nonsense. Gosselin is a little too optimistic that “deprivation” has been eliminated in America, as some conservatives like to say. How poorly those in poverty eat we now know. Diabetes is up, not because the poor are literally hungry—some in America do go hungry, by the way—but partly and maybe largely because bad food is
almost always so much cheaper and readily available than nutritious food.

    Gosselin, however, puts his finger on it. Poverty is not about black-and-white deprivations in the contemporary world. The poor in America live in total chaos—in his words,  “...—pay cuts and eviction notices, car troubles and medical crises, hirings and firings—that keeps reversing their families’ advances, rattling their finances, nudging them toward the economic brink.” Some have the audacity to say the poor can use their credit cards to bail themselves out of disaster. Yes, at 18 percent interest. Bring on the Mob! What do the poor borrow for?  A good restaurant meal? A pair of impossibly expensive sneakers? Maybe, once in a while. But Gosselin looks into a case or two: $170 to fix the steering on the car, a $300 cash advance for the rent, another $1,000 to bring a wife to the U.S. from Central America.

    On education, Gosselin tells us that a college degree doesn’t guarantee a good job but often lots of debt. On housing, he sniffed out the subprime dangers early. Regarding health coverage, he notes the usual problems of a health-care system dependent on the job: reduced coverage, higher co-pays. But he delves into the even more alarming scandal of policy cancellations and rescissions by supposedly respectable companies, a stunning and growing national disgrace that doesn’t receive enough attention.

    Gosselin doesn’t get everything, however. There is the shocking level of child poverty in America, higher by most measures than anywhere else in the rich world. There is highly unequal quality of public education.

    But, most important, there is simply the long stagnation in earnings, most obvious when we isolate males from females. Gosselin buys too easily into the notion that the American economy has, based on the conventional data like the unemployment rate and the growth rate, done well for a generation and that it is essentially financial security that is the issue.

    Not exactly so. To be precise, the 30-something median male—in the middle of the distribution—makes less after inflation today than did the 30-something male in the 1970s. As some perceptive commentators put it, the typical male today makes less than his father did 30 years ago.

    This needed more attention in an otherwise excellent book. In other words, typical men have made no progress compared with typical men a generation ago. This experience violates the true American dream, not the one about how we can all get rich, but the one about how, if we work hard, most of us will do better over time than the previous generation. We can’t all rise higher on the pyramid, but the whole pyramid can rise. In fact, that is what happened in the U.S. since the beginning. That is what made the nation special and its people optimistic. But now it no longer does.

    Meanwhile, women’s wages are up, and that’s what has mostly kept family income rising. But there is still an enormous gap between what men and women earn, far more than in some European nations, for example. In Sweden, men and women make about the same. Labor market discrimination? You bet.

    At least men haven’t fallen much behind in America, some will answer. Well, high-school-educated males have fallen behind by a lot. College-educated males have seen median wages stagnate for 30-year stretches and longer. Here’s some of my own data, done with the estimable researcher Nikos Papanikolaou.

Median Males: High School
(12th-grade diploma)

 Age 25-34Age 35-44Age 45-54

Note below that even typical men with a college education have seen no increase in earnings for 20- and 25-year stretches since 1969. 

Median males: College
(Four years / degree)

 age 25-34age 35-44age 45-54

Data: Jeff Madrick and Nikos Papanikolaou, Schwartz Center for Economic Policy Analysis, The New School.

    But more to the point, inflation-adjusted income, even if it rises slightly, does not mean that people are actually keeping up. The costs of education, health care, drugs and public investment have gone up much faster than incomes. So people can buy clothes, food or electronics more easily, but they can’t buy health care, or they have to move into an expensive house to get a good k-12 education for the kids. Or they can’t as easily afford their commuting costs. A subway ride in New York in the 1970s cost 35 cents; now it’s $2. That adds $50 a month to the commuting bill. This is why Barack Obama is right when he talks about bitterness and anger, and why claims that the political attitudes are only about culture shifts is wrong.

    Now the experience of the 2000s has brought the message home. Wages haven’t gone up at all in the 2000s, despite record profits and decent productivity growth. Family incomes are down. These are unprecedented in the modern economy.

  And all this follows a generation of rising insecurity, uncertainty, unrewarded effort and for many a treadmill of growing despair, cynicism and occasional chaos that this author describes so clearly, even elegantly. Gosselin’s gotten the new American condition better than anyone else I’ve read. 

Jeff Madrick is editor of Challenge Magazine and senior fellow at the Schwartz Center for Economic Policy Analysis, The New School.  A book of lectures, “The Case for Big Government,” will be out in June, from Princeton. He is also at work on a history of the U.S. economy since 1970, to be published by Alfred A. Knopf.

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By Joe R., May 15, 2008 at 4:38 am Link to this comment
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One of the most reliable instruments invented that can bring back honesty and integrity to our financial system has been and always will be the guillotine.

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By thebeerdoctor, May 14, 2008 at 9:44 am Link to this comment

Economics is always the toughest nut to crack, because when you are dealing with money, you touch the rawest of all human emotions. It has been reported that Jesus said: “you will always have the poor amongst you”. Even when I was very young, I never did quite buy into that assertion from the radical rabbi. It always seemed such a rotten but clever ruse to say: do not worry about what goes on down here because your treasure is stored in heaven. Apocalyptic excuses for poverty abound in organized religion, so it is not much of a surprise that Marx referred to religion as the opiate of the masses.
Economic injustice lies at the root of many of this world’s problems. The compliance to business… even when that business produces products that are destructive to life itself… has become the norm for governments. This is also a threat to people throughout the world who lumped into two basic groups: consumers with money, and those who do not have any. The latter are considered a threat to the existing order. As Bob Dylan once said: “too much of nothing makes a man ill at ease”. This is especially true in a market driven consumerist atmosphere, where tools are considered luxury symbols of affluent vanity.
The problems of energy, food and water, have solutions but lack the resolve, on the part of so-called leadership, to implement. Even tiny steps, such as changing our use of lighting, are subject to ridicule by corruptly content people such as Vice President Dick Cheney, who have a more reptilian view.They think that if you need more energy, you simply got out and get it, by whatever force is necessary.
Arnold Toynbee had it correct, militarism is always the greatest threat to human civilization. The military option, whether it is being touted by McCain, Clinton or Obama, is an indulgence that this earth can no longer afford. It is up to the people of this world to put an end to this, not the governments.
Technologically speaking, we have not even scratched the surface of developing tools to make this world more comfortable for everyone. A good place to start is to respect what we already have. If we are truly serious about energy, we will not just drive more fuel efficient cars, but learn to drive less and more wisely. When I mow my lawn with a reel mower, it is not because I am being noble or even ecological. I just do not like spending money on gas.

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By Steve E, May 12, 2008 at 7:47 pm Link to this comment
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Right on. Behind closed doors people are coming to the realization that for our society to survive, we must become more imperialistic before its too late. Now is the time to jump into bed with the Devil. Hell with playing by the rules. The main reason the world is turning into total chaos is because there are just plain too many people. China is the only country I know that tried to curb population growth. The irony is that in the capitalistic corporate world the more people the bigger the market. Big business wants huge population expansion.

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By Allen Wood, May 8, 2008 at 3:05 pm Link to this comment
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Get A Grip. The majority of American citizens carry too much debt. They have learned well from the Feds. It has been SOP for them to leverage debt at 30 times capital. The pyramid is upside down. Depression is looming. Sorry Jiminy Cricket but tomorrow will not be better for the average American. The I want it all now and to hell with future generations economy is drawing its last breath. The Illuminati has the stranglehold, and death is forthcoming. Have a Nice Day. When are people going to understand that what they have is only worth what someone else is willing to pay for it. When Martial Law is instituted, and food has run out how much do you think that 42” Plasma TV is worth, especially when there is no electricity to run it. Try eating it. It’s worth will be zero, and you will still owe money on it.  The post by G.Anderson is right on the money. We in America have turned into nothing more than shoppers. We produce nothing!

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By jane, May 6, 2008 at 5:35 am Link to this comment
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First, our standard of living is slipping. We have to pay for schools(junior colleges are even out of reach for several poor, let alone Cal State system and UC. next came toll road. The us government is pushing(gave incentives to LA if they started toll freeways (always the unseen hands).Then came the weakening of the dollars( 1/2 of what it used to be). Then inevitably, the refusal of Iran to take the dollars as payment but only Euros. Then came China with its vast amount of debt the US owed that it is using to buy oil, pushing the price higher. Your standard of living is slipping, your money could not buy what it used to, what do you think the public response would be?(Remember we are still the most powerful nation on earth, militarily). The situation narrowed your option to one solution: military conquest. Cheney-Bush can always claim that they have the public support.

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By Ian Thorpe, May 5, 2008 at 10:49 am Link to this comment
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Tony Soprano, echoing a line in The Godfather I think, once said, “The last businesses to be hit in a recession are gambling, prostitution and ours (crime)”
Well prostitution is already being hit as shown in the story I link to, crime has been hit so hard by cheap imorts from China, burglaries are just not profitable and even the bookies reports turnover and profits down.

This is a really bad recession.

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By jane, May 5, 2008 at 5:26 am Link to this comment
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To create unsatability in the market place at home and abroad, to create conditions that led to food shortages and therefore food riots abroad, to create conditions that led to recession, to go broke (700 millions a day is spent for the war in Iraq), to destroy unions, to strip its citizens of habeas corpus, to use biological warfare against its enemies, the neocons are very successful in denying all Americans regardless of whats, except those making money off this, their basic rights guaranteed by the constitution In fact this american way of life is being altered by natural causes with the neocons behind it. After all what would the public reaction would be?

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By whyzowl1, May 4, 2008 at 5:12 pm Link to this comment

Capitalism as we know it is doomed—or so concludes noted systems analyst Immanuel Wallerstein. However—needless to say—it is unlikely to “go gently, gently into that good night.” Wallerstein forsees a struggle unfolding over the next 20-40 years between the hierarchal, authoritarian defenders of capitalist primitive accumulation, and the democratic, egalitarian forces of the mass of the world’s people currently represented by the anti-imperialist, anti-neoliberal World Social Forum movement. Whose side are you going to be on when push comes to shove?

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By Dr. Knowitall, PhD, PhD, May 4, 2008 at 11:53 am Link to this comment

Good point.  The survival instinct is pretty strong and when people feel they or even their lifestyle is under real threat, do you think that will be enough to make them demand i,e,m,v leadership?  Or is that too pie in the sky?

I mean, even the greedy ones would rather give up some of their spoils rather than losing it all, don’t you think?

I don’t know, and I’m not even sure I’ll be around to see this all play out.  I just have this sense that a new day is dawning and I don’t think a lot of people are going to like it.  Cloudy with thunderstorms.

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By G.Anderson, May 4, 2008 at 10:04 am Link to this comment

” Here’s where we need intelligent, ethical, moral and visionary leadership. “

What do you think our chances our of getting that?

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By Dr. Knowitall, PhD, PhD, May 4, 2008 at 8:30 am Link to this comment

We always used to talk about the pendulum and how it always swings back in the opposite direction.  For decades, maybe centuries, I think it did.  But now there seems to be something different.

We’re told, that with our environment, we’re close to going beyond the point of no return.

I have a feeling that we’ve arrived at such a point with our economy.  I don’t think this one is going to swing back the other way.  This started in the 70’s and 80’s.  The fall has, as nearly as I can tell, been exponential.

Try to tell China and India they can’t become world economic players because they’re killing the Earth.  I’d look for a Bush-type to be bombing them in a decade of two.

We have to get used to doing with much, much less and we have to teach our kids a life-style altogether foreign to us.  This isn’t going to be easy.  Here’s where we need intelligent, ethical, moral and visionary leadership.

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By KANUEAR, May 4, 2008 at 7:25 am Link to this comment
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Here is something for you. On the more important subject of the economy and jobs. Hillary Clinton (NYS State Senator) promised to deliver 200,000 thousand jobs to upstate New York to get elected. Upstate NY has lost more than 50,000 jobs since and climbing.

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By LibertyWatch, May 4, 2008 at 7:20 am Link to this comment

Thanks for this very interesting report of the reality of our nations vital signs. Greed and Hubris have replaced Equality and Compassion in our society and the “Cut Throat” mentality of the competitive market place has destroyed the neighborhood store and market system for cheap slave market clothing at big box warehouse distributors and “Frankenfood” from corporate slop producers.

We need to return to the “Made in America” market demand which will also lead to American Labor recovering and the middle class can once more flourish and our future become enlightened.


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By DennisD, May 4, 2008 at 6:57 am Link to this comment
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Unfortunately many people in this country have acted like their government. The only difference being they can’t just print more money when they want something else or raise their salary to accommodate their whims. But when it came to piling on debt, they did pretty damn well. Now the bill collector is at the door.

An economy built on 70% consumerism never had a snowballs chance in hell of success. As we watched our job base being eroded by the corporations and their friends in D.C. who helped and subsidized their removal, anyone that couldn’t see the end game is either a fool or extremely naive.

The “For Sale” sign has been up in D.C. for a long, long time and we the people are currently in the mark down bin. You can bet your “repre$entative$” have not a thing to worry about as they continue the big lie.
Their seats in the U$$ lifeboat are assured.

A second revolution is long overdue.

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By Steven, May 4, 2008 at 6:17 am Link to this comment
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I agree with many of the valid claims and the policies of the last 25 years initiated by Reagan have had a profound effect on the nature of our economy.  However, most Americans do not carry the exorbitant debt especially credit card debt, that has gotten so much play in the media.  Only about 25% of Americans carry credit card debt.  The average credit card debt is 9,000, however when taken as the mean 50% have credit card debt less than 2,000.00.  So only about 13% of Americans have credit card debt over 2,000.  Hardly a crisis.

Our policies need to change.  The corporate welfare needs to be stopped, the wealth needs to be redistritbuted.  But we are in no means ready for collapse.  Most Americans still have the hard work ethic and the resolve to push through tough times.  The author is very much out of touch with the real America, most of those in politics, the media, and academia are out of touch.  I see real America every day and the author view does not match mine.

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By G.Anderson, May 4, 2008 at 5:37 am Link to this comment

Our economy began to go under when the Coporations realized that they could make much more money leveraging debt that just selling a product.

It’s not about how much your Salary is but how much debt you can carry.

This is partly due to the fact that as American’s we never actually own anything, we are always in the process of buying things we can’t afford.

Houses, Cars, and Credit cards. All these instruments establish us in debt which is later sold and leveraged to create more debt.

Turning your population into wage slaves requires support from the political apparatus, because ultimately carrying massive amounts of debt creates
poverty, by extracting wealth by statute.

America’s number one product is debt. We export that product to Asia and elswhere because we have nothing else to sell.

I had to roll my eyes the other day when I say Bernake on T.V., talking about protecting American’s from Credit Card Abuses?

How about rolling back credit card reform, and doing something about predatory collection practices of those very same card companies?

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By jackpine savage, May 4, 2008 at 4:03 am Link to this comment

We, as a nation, are far less capable of coping with economic shock than ever before.  The problems are mirrored between the national and individual levels.

Debt has been confused with wealth.  Liquidity has been confused with wealth.  Import consumption and service industries have been confused with sound economics.

All of the above are dependent on the US dollar being the world’s premier currency.  Unfortunately, our willingness to go into debt has eroded the dollar’s international standing.

And we are, as the author points out, “soft”.  The “can-do”, self-reliant American population is nothing more than mythological at this point.  (Certainly, some Americans are still cut from that cloth, but not enough…and certainly not a majority of them.)

The model we should be looking at is the late Soviet Union, not the America of the 1930’s.  Our economic and foreign policies resemble the USSR of the late 1980’s; only our speculative stock market is reminiscent of the late 1920’s.  The difference between Homo Sovieticus and Americans is that the former expected things to get worse while the latter expects a miracle.  The former spent all of his time living around, and under, the “system” just to survive; the latter expects the “system” to fix things.

We shall see, but miracles don’t look forthcoming.  And i, for one, do not see the land of pleasant living going gently into that good night of great nations.

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By ohBlab, May 3, 2008 at 10:25 pm Link to this comment
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Not just the pigeons, but vultures. Flesh-ripping beasts, tearing out your heart and soul. How will this horror end..?

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By steven andresen, May 3, 2008 at 10:56 am Link to this comment
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I can go along with Gosselin’s description of our tough times. I have not seen any real improvement in my local economy. Maybe a few more fast food stops, maybe some more houses going up. But, no manufacturing, no more merchandise going out the Port of Portland, at least not any more than what’s been coming in.

I read this,

“But that national character is now being tested in a less friendly economic environment. Are America’s reflexes, honed over a couple of centuries, up to the task? It is not clear.”

...and my thoughts go to the historical precedents discussed in my youth. Oh, the depression and FDR and what happened in Europe. Well, we can imagine that the Germans , the Italians, the french, or the Spaniards had it tough and chose to adopt some bad policies, bad from our point of view. Bad, because their economic ideas involving complete support for whatever would make profits for war material industries lead to wars against their neighbors and eventually against us.

But, when Bush is off in Iraq, and our national budget is so dominated by the same kind of policies that the Germans and the rest adopted, I am persuaded that we are now doing just what they did then when faced with economic stress.

I see that our national character is no stronger, not more able to resist the lure of fascism, the idea that if it’s good for business, it’s good for the country.

Some, like Mr. Wood, are upset at the people of America who seem to be selfish and soft, expecting their government to give them a free ride forever. Mr. Wood wants us to wake up and be more self reliant. Mr. Wood seems to forget about all the work that lobbyists have done to lower the tax rates on corporations and the wealthy, pushed by people like Bush, and supported by both Democrats and Republicans in Congress. I for one would not want the Corporations to think they should have a free ride. I wonder, however, whether Wood cares about going after corporations and those who really are getting something for nothing. Or, maybe he’s just interested in spreading the blame onto people who are not in a position to have done the worst to our country.

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By Jeanne, May 3, 2008 at 10:55 am Link to this comment
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I have gone through a lay off(my husband’s) and 3 months later a diagnosis of cancer. The prognosis? COBRA. We paid $1024 a month and it didn’t cover anything. When COBRA ran out we had to find an insurance co who would insure me. I was a pre-existing so the answer was always no. What do you think that did for my health? Anyway we survived that storm. I am now divorced partly because of the stress.

I work for a medical clinic and have good health care thank goodness. But this is what I see. I see children without health care and don’t get the care they need because of that. I see elderly who can’t afford their prescriptions. I see $20..$30…$45 co-pays. Who can afford that? Especially with a chronic condition and a need to see the doctor often? I see young adults who go without insurance (I won’t let my children go without even if I have to pay for part of their premiums). Going without insurance for young people is a disaster waiting to happen. Once serious case of the flu, or a kidney infection, or appendicitis or a car accident and they are in dept for a lifetime.

Insurance is expensive and it’s necessary. There is no saving great amounts for retirement. It’s impossible. Between insurance, gas prices, groceries , rent, and all the other ways to nickel and dime a person we are going bankrupt as a nation.

Who thinks that’s ok? That’s what I want to know. Who in leadership in this country is allowing this by not demanding changes in the conditions of the average American? That pitiful gesture by Bush to send every American a ‘stimulus package’ is merely an attempt to pacify the masses. It’s not going to work much longer. I imagine he hopes he’ll be out of office before the revolt.

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By Martial470, May 3, 2008 at 2:14 am Link to this comment
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Greed will never go out of fashion….Americans have been too greedy for too long.

The pigeons are finally coming home to roost.

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By Allen Wood, May 2, 2008 at 1:35 pm Link to this comment
(Unregistered commenter)

American Society developed the problems that we see today. It was Americans who decided that automobiles were not a method of getting from point A to point B, but a symbol of class and wealth. There must be a new model every year! Next were appliances. Again, there must be a better and new model every year. We just have to keep up with the next door neighbor. Americans have been taught to be wasteful, destructive pigs who’s only concern is to be better than the next guy, and to hell with the rest of the world, the environment, and even to our own children and grandchildren. We have been the “Got to have it Now, screw whoever gets in our way, and worry about the consequences tomorrow society”. Eventually, you have to pay the piper! NO ONE RIDES FOR FREE PERIOD!!! I hope the day comes when Americans finally wake up to the fact that YOU CAN’T HAVE ANYTHING YOU WANT FOREVER!. Some people in this country need to find out what it feels like to be without even 1 meal a day, like the majority of people starving in 3rd world countries. When are people going to wake up and realise that it is time to put on the brakes and stop demanding society to provide them with the means to be spoiled brats that can’t possibly make due with less. America deserves just what it gets in this downturn, because we have been begging for it for years. Have Fun

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By heavyrunner, May 2, 2008 at 10:28 am Link to this comment

Yes, we are getting screwed, and it is just a matter of time until there are major changes.  We have gone a long way down without a fight, but that can’t go on forever.

Throw in riot trained robo cop armed and outfitted storm trooper police making in six figures with guaranteed pensions that rival corporate parachutes - as long as they ignore morality and reason and do as the corporate paymasters’ hired lackeys order - and you can see that we could end up with a bloody fight on our hands before our country gets back on track.

Why, things are so bad that we have individuals in government who would, apparently, involve themselves in schemes like the demolition of the World Trade Center towers in New York, for profits and their world domination agenda.


When I was a kid in the 50s a guy with less than a high school education could work hard and dependably at the local corner gas station and support a wife and kids and purchase a home and Mom could stay home with the kids.

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By as, May 2, 2008 at 6:18 am Link to this comment
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This superb book review has reminded me of another book on the same topic, that I found very informative, if frightening: By Kevin Phillips (2008-Published by The Penguin Group), titled: Bad Money-Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism- (that, according to the author on book’s page 198, is “no longer in the future, but upon us…”

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