Down the Up Escalator (29 page)

He knew that his grandparents owned their home in Cleveland and that Duane’s sister moved in after both grandparents died. But he didn’t know much about the financial details, so he put me in contact with his aunt Claire.

I was surprised and touched by the things Claire remembered hearing from her brother about the GI coffeehouse. “That was forty years ago,” I demurred. But Duane had talked about the place so much, his sister responded, that “you’d think he got his honorable discharge from the Shelter Half [the name of the coffeehouse] instead of the army.” That made me feel bad once more about how I’d let our contact drop.

Claire filled me in on the days after Duane’s discharge when he came back to Cleveland.

“It was a kind of shitty time in the family,” she remembered. Her father, a welder, was out of work. “It started off as a normal layoff. Most years he was off a few weeks for retooling. But this one stretched out. Being home all day waiting meant he got involved with everything going on in the house. Our dad, well, let’s say he had a lot of opinions.

“Anyway, the way I remember it, Duane was hardly at home because that’s when he met his wife. Dad had his opinions about her too.

“No,” Claire said, “there was no big fight, just irritations. The whole family stayed close. Mom adored Duane, and he stayed especially close to my daughter. But it happened to be the first of the long layoffs for my father, and it was probably a good time for Duane and Sue to leave Cleveland.”

Though their father’s unemployment affected the mood of the home, it never threatened the ownership. “It wasn’t like today,” Claire explained, “where you have all these bills to juggle. Losing
the house was not on the horizon for my folks. Of course they may have tried to hide their worries from us, but as far as I know, even refinancing was never on the menu.”

According to Claire, their father served in World War II and bought their home on the GI Bill. When their mother died, Claire and Duane inherited the place free and clear. Since Claire and her husband lived in Cleveland and were ready for a larger home, they took out a mortgage to buy Duane’s half. It came to about $65,000.

Duane put all or almost all of the money into the first house that he and his wife bought. As far as Claire knew, he transferred that equity from house to house each time he picked up stakes.

“It’s too bad for his kids that he landed up in Arizona at the peak of the market, but real estate was never my brother’s reason for relocating anywhere. Duane wasn’t interested in scenery; he wasn’t interested in real estate. It was always about work he liked where he could keep learning. He always said he wanted to—

“Keep ahead of it,” Claire and I said simultaneously, echoing Duane’s old refrain.

“He was a supervisor on that last job,” she wanted me to know. “He might have been the only person he supervised; it was a small place. It had to do with lasers.”

“So,” I said, bringing us back to real estate, “your parents owned a house they could leave to their two children free and clear, and now one of you owns a house that you can …”

“Half a house,” Claire corrected me. “We paid down most of the loan for Duane’s share, but then we took money back out to help my daughter through college. Let’s say that my parents’ whole house was converted into a third of a house and a teaching degree.

“It’s too bad for Duane’s kids about the Arizona house,” Claire repeated. “But we probably won’t be able to leave a house either. My husband used to work where they had a company pension, but we don’t have that now. I don’t see how we can retire without selling or somehow taking the rest of the equity out of this house. I like to think that what we passed along to our daughter is a way to earn her
own
living and buy her
own
house.”

I assured Claire that she and her husband obviously passed many valuable things to their daughter in addition to a formal education. But it remains true that one couple in the grandparent or World War II generation had a house to leave free and clear. Two couples in the next generation will have somewhere between zero and a third of a house to leave.

It may not be entirely fair to say that the siblings moved down in the world or that Duane and his sister “lost” one and two-thirds houses during their working years. But it is fair to say that the current generation of investors owns one and two-thirds more houses. They may not know how to get cash out of them right now, but investors will emerge from this recession owning more of America. The generation that includes Claire’s and Duane’s children will inherit less. They’ll probably earn less too.

Not Your Normal Recovery

I mentioned that during past recessions employers tried to maintain their plants and keep core workers. It was basically a holding operation. But right in the middle of the Great Recession, Big Box went ahead with a major time-and-motion study designed to get
more work out of its warehouse hands in the future. The Boutique didn’t just put its saleswomen on short shifts. It used the recession as an opportunity to get rid of its entire commissioned sales staff. As business picked up, returning shoppers were welcomed back by low-paid part-timers.

Normally, salaries are low at the start of a recovery and gradually rise. They may rise “anemically” or “haltingly,” but the direction of recovery is up. But during the three years since the official end of the Great Recession in June 2009, median family incomes went
down
by 4.8 percent. Black family income declined by 11 percent.

In the spring of 2012 families with these lowered incomes increased their borrowing. This phenomenon was headlined on the financial pages as a sign of “returning consumer confidence.” Before the recession people borrowed to buy houses they couldn’t afford. In recovery they borrowed to buy cars and educations they couldn’t afford but felt they needed in order to find jobs. Is that a sign of consumer confidence or consumer desperation?

In 1929 the United States plunged from a peak of economic inequality into the Great Depression. A decade and a half of political and labor struggles resulted in significant redistribution, and we exited World War II on a leveler and more prosperous road.

By 2007 we’d reached another peak of inequality and plunged again. But unlike the Great Depression, the Great Recession didn’t narrow the wealth gap for even a moment. For all our bruises we merely went into a deep pothole and emerged on the same rough and dangerous road.

Wages are down, borrowing is up. Investors have emerged from a V-shaped recession, while the low line of wage earners’ L seems to extend indefinitely. That might mean that we’re in an unstable
recovery with more potholes ahead. But there’s another way to interpret it.

When American companies began moving manufacturing jobs overseas in the 1970s, the idea was to make products more competitively for the American market. Today, American CEOs impress potential investors with their foreign sales figures and their plans to open new markets abroad.
The companies that wrote us off as workers now write us off as consumers
.

If you’re not a worker, not a consumer, and you don’t earn significant income from investments, then you don’t have much of a place in capitalist society. In the course of this recession millions more of us have slipped into that no place. Most of us will still manage to eat and keep our televisions connected. But it can’t be pleasant to live in a country whose elite have no regular use for us.

In Decline?

The phrase “jobless recovery” gained currency in the 1980s to describe what seemed then like an oxymoron. In the decades that followed, however, our recoveries routinely ended with a smaller percent of the population in the labor force. But once output is up and portfolio wealth has rebounded, the crisis is officially over. If you look at it that way, the horizontal line of our L is neither an extension of the Great Recession nor an abnormal-shaped recovery. That low line is the new norm.

The limbo bar will be set lower after each recession, and Americans will just have to contort themselves to squeeze under. This is inevitable, according to an increasingly mainstream assumption, because the U.S.A. is in decline.

Aspiring politicians don’t usually announce that their nation is past its glory days. I suppose that’s why reporters at a Bloomberg View breakfast in June 2012 perked up when former Florida governor Jeb Bush said matter-of-factly, “We’re in decline.” Columnists from both
Slate
and the
New York Times
took Bush’s almost parenthetical comment as a sign that this son of a president and brother of a president was no longer a contender. But while politicians rarely say it, our financiers and industrialists not only think but act upon it.

What a reversal! When I met Duane at the GI coffeehouse, we peaceniks were considered anti-American. We denied it then and I deny it now. Still, there were usually a few on any antiwar march who anticipated the empire’s decline and may even have gloated.

Today it’s not our protestors but our corporate leaders who anticipate American decline. And while they may not gloat, they certainly hedge their bets. The thinking seems to be “We’re in decline; there’ll be less to go around;
I
want as much as ever, so
you’ll
just have to take less.” Or, more primitively, “I’m getting mine while the getting is good.”

Are they right? Is our long-term decline inevitable? I tend to think not. But frankly I don’t know any better than they do.

I do know, however, that a nation doesn’t have to be the world’s supreme industrial power nor have its largest economy (however that’s measured) for its citizens to live comfortably.

During the decades when America bestrode the world like a Colossus, many nations peeked out between its legs—producing, buying, selling, and dividing the profits. The nations that divided them the most equally, the cradle-to-grave welfare states like Germany, France, and the Scandinavian countries, also had the most
productive economies. During the Euro currency crisis (another top-down financial innovation), the nations with the greatest inequality happened to have the most fragile economies. Yet the fix so often prescribed for us is austerity for the masses and incentives for the rich. In other words, even greater inequality.

How many more recessions and jobless recoveries can we cycle through? How many times can we emerge with the rich richer, the poor poorer, and more of the middle class marginalized? Are there any inherent limits to inequality? What happens to a market economy when all the money winds up in one pocket?

It’s Time for a Jubilee

A child who’s beating his parents at Monopoly knows that the game will end if he gets
all
the money and
all
the properties. But the more he gets, the more he gets. If he wants to keep playing past his bedtime, he has to find a way to slip some money or houses over to the other sides of the board. But that’s not that easy to do, at least not if you stick to the rules. If he really wants to keep the game going, the child will have to cheat.

Throughout history, societies have faced economic paralysis when too much wealth wound up in too few hands, so they invented cheats to keep the game going. American Indian communities practiced periodic redistribution rites like the potlatch. Ancient Babylonian kings issued occasional debt cancellation decrees to counter the tendency for all the good land to fall into a few hands. The ancient Hebrews prescribed debt cancellation and land return every forty-ninth year. It was called a Jubilee.

For four decades a variety of corporate and governmental policies converged to transfer wealth from the poor to the rich. As a result, workers developed a need to borrow, and investors had an even more desperate need to lend.

This has played out as forty years of “innovation” in the financial world and as anxiety and exhaustion in the daily lives of American families who took on more jobs and more debt. It’s time for a Jubilee.

How do you end a book about people whose lives are still up in the air? None of the recession sufferers we spoke with in
Down the Up Escalator
were hungry, and only one was truly homeless. But most of them couldn’t be sure where or when they’ll work, how long they’ll be able to stay in their homes, whether they’ll ever be able to retire or to have a baby, and more generally what will happen next.

Uncertainty is painful to human beings (and to other species too, I suspect). I can’t quite bring myself to leave people I got to know personally—not to mention millions of others—in such distress. So I’ve created a Web site that we might call the ongoing book on the ongoing recession.

A book eventually gets printed. But no deadline stops me from getting back to individuals to find out how they’re getting along. Their updates, taken together, may also give us some idea how the country is getting along.

You can catch up with the folks you met in these pages at
www.​down​the​up​escalator.​com
.

I subscribe to the
Financial Times
and the
Left Business Observer—
two surprisingly well-written publications. Despite their different takes on capitalism, they almost always come up with the same statistics about the current economy. Those are the figures I most often cite in these pages. The
Financial Times
is a salmon-colored paper available at newsstands. To subscribe to the
Left Business Observer
, go to:
www.​left​business​observer.​com
.

While writing this book I attended Professor Richard D. Wolff’s monthly Update on the State of Global Capitalism (see
www.rdwolff.com
). Wolff’s forthright Marxist analysis highlighted the fatal folly of lending to workers instead of paying them sufficiently.

From the very start of the Great Recession, economists including Joseph Stiglitz and Paul Krugman described it as a crisis of insufficient demand. They struggled against a sea of pseudo truisms to show that the kindly policy response would also be the hard-nosed and effective one. Economists from URPE, the Union for Radical Political Economics, did the same in their circles.