Where Did the Recovery Go?
Has economic growth reached the stage where it is no longer effective for most of us? An increasing number of observers believe that is the case. In arriving at the plateau where we almost blindly believe that economic growth surely must be good for us all, we have somehow suspended our understanding of what we see really going on in our communities.
Let’s put in this way: if markets are in a growth swing again, as economists continually remind us, then why aren’t we sensing it. Obviously some are making great gains since the official end of the Great Recession, but that’s not me, nor anyone else I know.
On a highway just outside of San Francisco is a billboard which reads,
1,000,000 people overseas can do your job. What makes you so special?
Ouch! That’s exactly how the average person feels. It especially carries traction in my town of London, Ontario, whose unemployment rate hovers just below 10%. We have seen too many firms pull up stakes and contract out thousands of jobs to those people in developing countries mentioned on that billboard.
Somebody has been making the billions of dollars talked about in the last two years, but we have no idea whom they are. During that time, the vast majority of workers – our neighbours, friends, and family – who are remarkably skilled at their jobs, have not only lost out on those vast sums gained but have actually found their companies, salaries, and pensions put at risk by the same forces that enriched all those others during the Great Recession. We now stand in direct competition with workers in poorer countries who gladly would do our jobs for one-quarter of the salary.
All this is having a devastating impact on what used to be the kind of economic progress that once used to benefit the most of us. You don’t have to take my word for it. Listen to what Alan Greenspan, a strong advocate of relentless free market capitalism, said in a recent interview. It’s terribly revealing:
The U.S. economy has become very distorted. There has been significant recovery since the Great Recession – amongst high-income individuals, large banks, and large corporations. But the rest of the economy, by contrast, including small businesses and a very significant amount of the labour force, are stuck and still struggling. What we are seeing is not a single economy at all, but rather fundamentally two separate types of economy, increasingly distinct and divergent.”
We all know this to be true, but we wait in vain for leaders – financial, political, even moral or ethical – to address this growing problem.
So, let’s ask again: Has economic growth reached the stage where it is no longer effective for most of us? I think I know how most of us will answer, but let’s put it in something of a framework.
For instance, if the economic recovery is significant enough, why is the gap between the rich and poor continuing to grow? For that matter, why is the chasm between the middle class and the wealthy expanding? If economic growth measures the Gross Domestic Product (GDP) as a way of determining how economic benefits of prosperity are distributed throughout the country, why does the middle class remain stagnant in a time of recovery? Since economic growth merely shows how much more wealthy a country is as a whole, how do we square it when greater economic gain doesn’t filter down effectively to the majority of citizens?
Or where are the jobs? If our economy is growing, shouldn’t employment follow? The answer is clearly “no”. It took 4-5 months for the job picture to start growing again following recessions. But in the recession of the early 1990s it took almost a year. What do we say now that the Great Recession has been over for two years and yet unemployment remains so stubbornly high? What ever else you call it, this recent recovery can add “jobless” to its other descriptions.
Are our environmental prospects looking any better now that the recovery is supposedly clearly underway? The answer again is in the negative. The lack of environmental action will only curtail our economies in the long run, limiting progress and taking jobs along with it. How has the recovery helped?
Historically, citizens have always opted for recovery over recession, but they can be forgiven if, for the last two years, they can no longer discern the difference. This time around things really are different. We aren’t just living through a replay of past recoveries; we are in an entirely new model where growth no longer becomes evident in our communities. A populist fear is now growing that increases in market prosperity are moving ever upward and out-of-reach from the average Canadian worker and family. This is no longer supposition but reality.
If economic growth no longer lifts all boats, even the majority of them, then is it time to consider a different model – a new system for the new wealth? Sooner or later more of us will be asking that question, for as business motivator Peter Drucker puts it: “A society in which knowledge workers dominate will be under threat from a new class conflict – between the minority of knowledge workers and the majority of people, who will make their living traditionally, either by manual work, or by work in services.” That time is coming and we will have to choose – or not stand up and just ride the bus with everyone else.