The Era of “This Isn’t Working” May Stick Around.

December 6, 2021 8:53 PM

"How This All Happened, 5000 words tracing the boons and busts and expectations in the US since World War II.

"Things were very uncertain, then they were very good, then pretty bad, then really good, then really bad, and now here we are. And there is, I think, a narrative that links all those events together. Not a detailed account. But a story of how the details fit together."
posted by MrGuilt (36 comments total)

I am glad I read this. The idea that the scars of the then will linger into the now is something I've read in other theories about how history works to influence the present. They feel true to me.

Thanks for posting!
posted by hippybear at 9:41 PM on December 6, 2021 [1 favorite]

This is fucking excellent. Every "but..." interjective reaction I was prepared to bring here was addressed in-flight by the author.

Here's some color:

% of prime-age population in manufacturing -- rose to 1 out of ~4 (!!) people by 1970, then fell to 1 out of 10 today.

Annual consumer debt take-on / total wages -- shows just how off-the-hook the Bush Boom mortgage craziness was (and how Volcker was brought in to rather forcibly tamper down baby boomer enthusiasm for buying on credit)

Systemic debt leverage -- total debt (ex Financial sector) / GDP -- not sure what it is telling me, I just like how clean the stair stepping is

Fed printing influx / personal income -- what it says on the tin

U.S. Net International Investment Position -- this is a measure of how much foreigners own US assets vs. how how much we own them. Theoretically (like if you ask Krugman) this is neither good nor bad, but while I don't know anything I wish the trend was going the other way, ya know??
posted by Heywood Mogroot III at 9:46 PM on December 6, 2021 [8 favorites]

An interesting read - well put-together and concise. It certainly does feel like we (globally) are heading inexorably down a path towards something. Whether it's something as horrible to contemplate as global conflict or not remains to be seen, but the level of angst in the world about well, everything, can't be sustained.
posted by dg at 9:46 PM on December 6, 2021 [7 favorites]

One more -- The Ratchet -- housing expenditures / total wages

This is related to The Two Income Trap -- a large part of the 1970s-80s housing price boom was the rise of two-income boomer households bidding up the cost of housing to the point that the competing single-income households were priced out.

The nice 3B/1 bath home in Salinas CA my parents rented in ~1980 for $400/mo (14 hrs/week of the average wage) now rents for $3000/mo according to Zillow -- 26 hrs/week of today's average wage, a 50% real increase in the cost of housing.

Housing is our biggest life expense, and it is central to our current problem, since it is an IMMENSE rent tap the top ~10% enjoys on the renting lower quintiles.
posted by Heywood Mogroot III at 10:06 PM on December 6, 2021 [18 favorites]

Wow, great article!
posted by lazaruslong at 12:52 AM on December 7, 2021

This was interesting, but I couldn't help feeling this was a particularly financialized account of history, in which the great prime movers are things like interest rates and debt loads. And it makes me wonder about the opposite, if you had to explain the last century of US history purely in concrete physical terms, without ever referencing money, what would that narrative look like?
posted by Pyry at 1:12 AM on December 7, 2021 [19 favorites]

great question -- i would absolutely read that article.
posted by lazaruslong at 2:49 AM on December 7, 2021

last century of US history purely in concrete physical terms, without ever referencing money

obligatory Network boardroom scene

Looking back over my adult life, the decennial recessions have really kicked me in the nethers each time [save for last year's yeay].

Annualized firings / workforce -- e.g. in the teeth of the 2008-2009 recession, had the rate of the March '09 job losses continued, the workforce would have contracted 25% (Great Depression levels)

I was in LA in 1990 finishing up my degree . . . couldn't see the Dotcom boom coming so decided to go off to Japan to seek fame & fortune instead.

Came back to the US in 2000 thanks to a dream job offer but the 2001 downturn nixed that.

. . . was "let go" again in 2008 -- put me in a funk for 5+ years.

Save for the 2020 recession, the macro/money picture is not exogenously driven by space aliens, it is driven by monetary policy, gov't spending, interest rates.

And a lot of the past year's housing price rise was due mortgage rates being lowered by the Fed to the floor -- rates this low makes any property pencil out for specuvestors buying property to rent out to people, and boy are they buying.

Back to Paddy's scene above, it was the "ebb & flow" line that got me thinking about money and personal economics . . . Elon's billions & billions, nor Tom Brady's millions, do not impoverish me since they have created new value for that money [and they trade in luxuries, not necessities...]

But there are many, many money collectors in this system that do not create value for money -- they just capture pre-existing service-providing assets to rent out, or in the case of health, legal, and educational sectors, artificially structure scarcity into the economy to be able to extract rents from their services.

Back to your question, I'll just link to my previous "wealth" rant here.
posted by Heywood Mogroot III at 6:53 AM on December 7, 2021 [9 favorites]

artificially structure scarcity into the economy to be able to extract rents from their services

This. 21st century so far is the walled gardening of, well gardens (homes, etc, not just apps)
posted by Reasonably Everything Happens at 7:06 AM on December 7, 2021 [1 favorite]

Elon's billions & billions, nor Tom Brady's millions, do not impoverish me since they have created new value for that money

I agree that value is not a zero sum game.

But also, what happens when Elon's labor practices depress wages, or his company receives enormous taxpayer subsidies, or his infantile tweets manipulate the stock market? Or, most superficially, he just doesn't pay taxes? Or what about when he endows a Super PAC or pays a lobbyist? Or takes out an ad in the New York Times?

That kind of money has, like, effects. Its gravity informs the landscape to be more favorable to its own existence. To the impoverishment of us all.
posted by Horkus at 7:45 AM on December 7, 2021 [33 favorites]

Worth it for this quote: Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.”
posted by tommasz at 7:50 AM on December 7, 2021 [17 favorites]

U.S. Net International Investment Position -- this is a measure of how much foreigners own US assets vs. how how much we own them. Theoretically (like if you ask Krugman) this is neither good nor bad, but while I don't know anything I wish the trend was going the other way, ya know??

OK. Here's the deal. The US is the reserve currency of the world. Do you know what that means? It means that it gets to send out worthless bits of paper into the world and get back goods and service in exchange. But let's go deeper. What are those pieces of paper in essence? They're a promise by the United States, its full faith and credit, that the debt will be repaid by any who ask.

What you are asking is the US government abandon its promise that the debt incurred by those notes will be repaid. What happens if the US government abandons its promise? The US loses its economic hegemony, the currency sinks like a stone, and Americans won't enjoy an artificially inflated standard of living buoyed by cheap imports on the back of what is basically modern day imperialism.

So yeah, you're pretty much asking to have the cake and eat it too. While a bunch of people in other countries have been given worthless scraps of paper in exchange for their labor being told "with this paper you can have some cake too."
posted by Your Childhood Pet Rock at 7:53 AM on December 7, 2021 [7 favorites]

This is a good explainer and I am not an economics expert, but there are a few things missing this depoliticized and financialized account.

The beginning of the narrative here concerns the US/Truman freaking out about the end of wartime spending. What's missing in this story is that the answer came not simply from consumer credit and lifestyles, but the fact that the US ratcheted up military spending--a process called military Keynesianism in the form of the Korean and Vietnam Wars.

The somewhat financialized emphasis also leads to a tendency to take indicators like inflation and interest rates as simply givens, rather than something that reflects another reality rooted in, say, geopolitics and class struggle. For example, the article attributes housing debt going up simply out of a desire of Americans to "keep up with the Jones's"--but this totally idealist explanation ignores the role of predatory lending and the way that home ownership served as the central ways for (mostly white) Americans to jump to the stable middle class.

Similarly, in this account, inflation simply goes up in the seventies with no explanation. However, if you were to read Arrighi, you would learn about how inflation is linked to drastic deficit spending to finance the Vietnam War. If you were to read Panitch and Gindin, you would see that inflation may have been related to labor militancy--and the 1970s downturn was linked to the attack by corporations and the right wing neoliberal project of austerity. The article makes it seem as if the Fed were some non-human deity that apolitically presides over the economy, but its decisions have been deeply political. When faced with inflationary stagflation and inflation, Fed head Paul Volcker didn't decrease short-term interest rates, but instead shrank the money supply, ramping the inflation rate up, boosting unemployment, and creating a recession. We live in the ruins of this neoliberal counter-revolution.
posted by johnasdf at 8:13 AM on December 7, 2021 [21 favorites]

The defining characteristic of economics in the 1950s is that the country got rich by making the poor less poor.

Worth repeating.
posted by chavenet at 8:23 AM on December 7, 2021 [16 favorites]

Also worth repeating is this idea:

And it makes me wonder about the opposite, if you had to explain the last century of US history purely in concrete physical terms, without ever referencing money, what would that narrative look like?

I think frequently about the fact that money is fundamentally a faith-based system: it only exists if you believe in it. (Of course if you are interacting with people who believe money exists, you have to deal with that whether you agree with them or not.) I’d love to read a physical history.
posted by fantabulous timewaster at 9:00 AM on December 7, 2021 [2 favorites]

I think frequently about the fact that money is fundamentally a faith-based system: it only exists if you believe in it.

It's not. The reason everyone in the US grinds on the treadmill for US dollars instead of pretty shells is because you pay your taxes in it. And if you can't pay your taxes the US government will confiscate your assets and possibly go after you by force if necessary. The thing that's special about a twenty dollar bill is that it's the only thing that will cover twenty dollars in debt that you owe to the United States Government.
posted by Your Childhood Pet Rock at 9:28 AM on December 7, 2021 [6 favorites]

Its weird how many of these econ *history* breakdowns of how we got to today, leave out the huge obvious part of history. Post war growth was hugely fueled by exports, and our surviving fiance sector, including the governments ability to loan and profit off rebuilding most of Europe.

From the 40s - 60s America made and exported fine products and resources, but we were also basically the only game in town, 70s on for the first time, we had not only competition, but over saturation and real competition for resources like oil and finance. The 80s brought creative accounting, the S&L crisis, and just before a new bust, the invention of the internet barely averted the cratering of the US again.
posted by vincentmeanie at 10:12 AM on December 7, 2021 [3 favorites]

70s on for the first time, we had not only competition, but over saturation and real competition for resources like oil and finance.

"Competition". The US had competition from other places coming out of Europe and Japan which were rapidly seeing wages and standards of living grow to their US counterparts. This wasn't really a problem though because everyone was buying everything off everyone and everyone was getting richer through specialization.

The stake in the heart of the middle class were the CCP willing to lend their slaves citizens out for crumbs of hard currency to American manufacturing. This basically cut the labor bill for manufactured goods and let capital pocket the difference between what US wages were and the dollar a day they paid for each Chinese worker. Rather than lose an influx of hard currency which bought the Mercedes for each of the CCP's higher ups, the CCP basically kept wages as low as possible for as long as possible.

When you see the break in the graph between US productivity and US wages it was basically when Nixon went to China and opened them up for exploitation.
posted by Your Childhood Pet Rock at 10:31 AM on December 7, 2021 [6 favorites]

For a deeper dive into the post-war economic boom, how it ended, and why it's unrepeatable, there's An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy. Summaries here and here.
posted by PhineasGage at 10:33 AM on December 7, 2021 [1 favorite]

Save for the 2020 recession, the macro/money picture is not exogenously driven by space aliens

(emphasis mine)

i know for sure now who economically probed me up the bum last year
posted by Ten Cold Hot Dogs at 10:38 AM on December 7, 2021 [1 favorite]

And if you can't pay your taxes the US government will confiscate your assets

Those would be some of the “people who believe in money” to whom I was referring.
posted by fantabulous timewaster at 11:14 AM on December 7, 2021

the CCP basically kept wages as low as possible for as long as possible.

yeah I was going to add this yuan graph too as it has great explanatory power if you know what you're looking at.
posted by Heywood Mogroot III at 11:35 AM on December 7, 2021 [2 favorites]

yeah I was going to add this yuan graph too as it has great explanatory power if you know what you're looking at.

*CCP slaps China on the roof* "This bad boy can fit so much yuan in it"
posted by Your Childhood Pet Rock at 11:45 AM on December 7, 2021 [3 favorites]

Something I think we're missing is the emphasis on short-term, quarter-to-quarter thinking that pervades business. There's little incentive or motivation for businesses, particularly those that are publicly traded, to focus on anything but making sure the numbers on the quarterly report for this quarter are higher than they were on the same quarterly report last year. That way, the stock price goes up, the shareholders stay happy, and the CEO keeps their job. Anything that gets in the way of making that number on the quarterly report bigger is a problem, and nothing is seemingly off-limits if it makes that number go up. Cut costs, sell less product at the same price, suppress wages, fire employees, outsource to countries with a lower cost of labor (because it's still cheaper to import stuff made there), and when you run out of things to cut, find a company in your industry that's in a similar boat, and merge with them.
posted by SansPoint at 12:35 PM on December 7, 2021 [4 favorites]

"Something I think we're missing is the emphasis on short-term, quarter-to-quarter thinking that pervades business."

That, and the pernicious myth (propagated and encouraged by the courts) that all public companies must chase short- to medium-term shareholder value to the exclusion of all else, including sustainability of the business itself. They're not creators or builders delivering products, or community institutions employing people, or environmental actors with a responsibility to breathable air; they're ATMs for shareholders, full stop, the end. It's hard as fuck to building lasting, long-term value -- or jobs, or clean air, or social or criminal responsibility -- when all companies are the same as all other companies and their sole purpose is to let rich people extract cash from them. Doesn't matter if it comes from their profits or from their collapse.
posted by Eyebrows McGee at 1:45 PM on December 7, 2021 [7 favorites]

And it makes me wonder about the opposite, if you had to explain the last century of US history purely in concrete physical terms, without ever referencing money, what would that narrative look like?

I'll take a pop at it:
It would start with the advent of the car and the Great Depression's crush on business. So LA, Chicago, and many other major cities lost 25% of their downtown real business, replaced with car parking garages and surface lots between 1925-1945. So The Great Depression and the war put the stop to home and office construction for a solid decade, which enabled the first post-war suburbs and suburban construction. The post-war boom was basically single family home and highway construction. Then the post-war shift of population from the NE to the southern suburbs in dramatic numbers. And the car enabled business ownership to spread across much larger area (air travel helped too), such the business consolidation and then retail consolidation was enabled. So McDonalds/WalMart/etc and corporations started getting larger and serving the entire country.
posted by The_Vegetables at 2:14 PM on December 7, 2021

Also, all that stuff I typed above is extremely financially unproductive.

Theoretically, the US should get more dense and each thing cost less on a per-capita (per local jurisdiction) basis, leaving each family with more income. Of course, you add more services, so the cost may not go down. But instead of densifying, the US got less dense over the past 50 years, so each thing cost more (education, sanitation, salaries) leaving no money for extras (like universal healthcare).

So yeah, the two income trap is real and business chasing quarter to quarter is true, but it's only half of the story. The standard of living since then has risen, but it's on the back of an extremely fragile economic system that if not subsidized is extremely unsustainable. And one that if you are outside the small group it is designed for (2 parents, 2 kids, college-educated high paying job) you are screwed.

And then you have jerk-offs like Paul Volker crushing wage growth via 'inflation' fighting mechanisms exactly as johnadsf posted. Look at the below chart that Heywood Mongroot III finds so damning: it's flat for 50 years with maybe a gentle rise until 2010!
posted by The_Vegetables at 2:23 PM on December 7, 2021 [2 favorites]

a large part of the 1970s-80s housing price boom was the rise of two-income boomer households bidding up the cost of housing to the point that the competing single-income households were priced out.

A much bigger part was CA downzoning (due to suburbs thing I posted above) heavily in the 1960s and on. LA was zoned for 20 million in 1920, is only 4 million today. Most of the downzoning occurred post-WWII.
posted by The_Vegetables at 2:29 PM on December 7, 2021 [3 favorites]

if you had to explain the last century of US history purely in concrete physical terms, without ever referencing money, what would that narrative look like?

1900 world population: ~1.6 billion
1900: Standard Oil adds California oil to Penn holdings
1901: Spindletop gusher in Texas

US engineering can plan to use oil, but sparingly

1913: Haber-Bosch process good enough to produce reactive N for explosives in WWI.

WWI still heavily dependent on animal power (including guano for Allied explosives); oil an enormous advantage.

H-B improves between the world wars, increasingly using fossil energy to produce N fertilizer.

1938: Dammam oilfield opened in Saudi Arabia by US companies and engineers.

WWII is fought with oil, mostly oil the US controls somehow.

Frugal engineering from 1900-1940 spreads to everyone on cheap oil; frugality is not required by ongoing plans.

1973: the US energy crisis is the effects of global power politics on US energy consumption. Decades of physical work getting predictably easier stops, very like a game of musical chairs.

2000 & ff:
world population nearly 5 times as large as in 1900;
about half of the N in human tissues has been through the H-B process;
fossil energy is not going to be easier to get, ever.
posted by clew at 2:55 PM on December 7, 2021 [2 favorites]

Is there a difference between "capitalism" and "consumerism"? Are there countries that were/became capitalist after ww2, that did not become consumerist?

I wonder if it would have been possible for consumer debt and credit cards to have become widespread before the war. I bet the technology and beurocracy required to administer credit cards didn't exist during ww1, for example. But then I am curious about our current credit card monopolies; were there regional and local credit cards? When did mastercard and visa take over?
posted by rebent at 3:37 PM on December 7, 2021

Off the top of my head, the US started using pure consumer credit in the 1920s, but it was much harder to get and widely disapproved of. Which seemed prescient after the Depression.
posted by clew at 4:07 PM on December 7, 2021

Cf. “Their aim was to create a new world... but this was a fantasy...,” deeker, 11 February 2021

Documentarian Adam Curtis has a new series - Can't Get You Out of My Head with all six episodes available now on iPlayer.

posted by ob1quixote at 4:39 PM on December 7, 2021

I'm not a fan of this article... it pretends to be apolitical, but there's a pretty clear goal of setting up the problem as a problem of expectations... that the problem is that Americans expect they can live the same lifestyles as the wealthy even when this is not financially possible without a lot of debt.

I used to follow Marginal Revolution, a blog run by an academic economist funded by a conservative think tank (the CATO institute), and they would float the same idea - that postwar America is an exceptional period, and what we're seeing now is more of a return to the historical norm.

It doesn't talk about the costs of having a small group of people become obscenely more wealthy than everyone else in a democracy, while worker's rights erode. But the costs are real, there's a real cost to society when a small group can buy their way into more political influence, and a larger group doesn't have the protections on their time they'd need to stay politically informed.

Even TIME magazine had an article recently about how inequality in the US should be considered a threat to our national security because of how much unrest it creates. There's also environmental costs, because the wealthy are driving a lot of carbon use by flying all over the place. It's not a neutral thing to allow this to happen, and it's not good for democratic government.
posted by subdee at 6:23 AM on December 8, 2021 [4 favorites]

Is there a difference between "capitalism" and "consumerism"?

One can debate whether one necessarily leads to the other, but there certainly is a difference between an economy in which private owners control the means of production and an economy that depends on massively over-leveraged household spending for continued growth.

I'm not a fan of this article... it pretends to be apolitical, but there's a pretty clear goal of setting up the problem as a problem of expectations... that the problem is that Americans expect they can live the same lifestyles as the wealthy even when this is not financially possible without a lot of debt.

I was torn on how to read this angle. On one hand, yes, you could read it as another trite “it’s those damned kids and their avocado toast who are to blame” hot take, and frankly I’m shocked (but not that shocked) at how easily we slipped from the postwar economic jingoism of American Capitalism as the engine driving prosperity for all into “you don’t deserve to want petty luxuries, and that’s why you’re poor.” On the other hand, the ground truth is that our economy depends on fostering and exploiting that expectation, as well as the late-stage victim blaming deflection, and we have a lot of mechanisms that make it inescapable. For instance, it’s not just the individual consumer himself who mistakes his credit score for a measure of individual human worth. Following the principle of charity, perhaps the author’s sin is not making it sufficiently clear that this is a manufactured phenomenon imposed on the public, not one that emerged spontaneously among consumers themselves, and one on which the economy depends, increasingly precariously.

Cheap credit is meth for the economy. At first it’s great. People can buy stuff they were never able to before, sales increase, stock prices rise, and we’ve got it under control because of course we’re using responsibly and we’ll be able to pay that consumer debt with future labor. “Sleep when you’re dead” sounds cool when you’re young, healthy and well-fed. Then comes the self-neglect. Cheap credit means people can go a little longer without a raise, or with sub-inflation raises, while prices can rise just a little more quickly, which makes the entire exercise more profitable still. Now those comfortable stock prices depend on exploiting the knock-on effects of cheap credit, and the consumer needs credit spending just to get through the day. Eventually (and by “eventually” I mean “now”), the whole thing is stretched too thin and cannot be sustained. The idea that there is sufficient future labor (at lagging wages) to pay for the present spending becomes increasingly suspect, but the consumers no longer have a real choice—they just aren’t paid enough to cover the nut and service their existing debt too. Fishing around for ever more exploitative labor models (e.g. the “gig economy”) is rooting around in recycling bins for aluminum cans to sell in the hopes of keeping the “growth” party going one more day. Misleading financial reports and shady financial instruments (e.g. CDOs) are pawning your cousin’s DVD player. Pointing to personal irresponsibility deflects attention away from the extent to which the pockets of billionaires rely on that same so-called irresponsibility for their comfortable lining, and of course that “irresponsible spending” includes frivolities like medical care.

This is just another case in which “personal responsibility” is a deflection from systemic accountability. I think everybody would agree that not littering is a good and personally responsible thing to do, and some kinds of recycling are a net positive (aluminum, most notably), but that doesn’t alter the reality that personal anti-littering and pro-recycling messages were initially pushed hardest by the entities flooding the world with single-use trash in the first place, and which were lying about the prospects of effective recycling at all, to deflect criticism off of themselves.

Things fall apart, the center cannot hold, etc. The blood-dimmed tide is rolling in, and we are desperately trying to keep fooling ourselves it’s just another lovely day at the beach.
posted by gelfin at 7:50 AM on December 8, 2021 [7 favorites]

This text made me remember this funny collection of graphs.
posted by BruxoPimba at 10:28 AM on December 8, 2021 [1 favorite]

I'm not a fan of this article... it pretends to be apolitical, but there's a pretty clear goal of setting up the problem as a problem of expectations... that the problem is that Americans expect they can live the same lifestyles as the wealthy even when this is not financially possible without a lot of debt.

I agree and disagree. The article does set out to be apolitical in that it doesn't go down a path of <party> did this, then <other party> did that. However, the problem is expectations that grew and grew and grew in an unsustainable and inequitable way. What the article doesn't touch on is that the expectations were dangled in front of ordinary people at a time when they were coming out of many years of not having expectations, beyond just surviving to live another day, by those who sought to benefit personally by fulfilling those expectations. In attempting to be apolitical, the article leaves out why those expectations were dangled in front of people.

Mostly, that doesn't matter in the context of an article that attempts to lay out a sequence of events in a simple and non-partisan way. It does leave a gap in the story for the observant reader, though.
posted by dg at 12:33 PM on December 8, 2021