from the world's big
We are entering a recession – but what did we learn from the last one?
Inequality from the Recession has a lot to do with how the government designed its response.
Yet it is clear that these two downturns differed not only in severity but also in the consequences they had for inequality in the United States.
Though the Depression was bigger and longer than the Great Recession, the decades following the Great Depression substantially reduced the wealth of the rich and improved the economic security of many workers. In contrast, the Great Recession exacerbated both income and wealth inequality.
Some scholars have attributed this phenomenon to a weakened labor movement, fewer worker protections and a radicalized political right wing.
In our view, this account misses the dominance of Wall Street and the financial sector and overlooks its fundamental role in generating economic disparities.
We are experts in income inequality, and our new book, “Divested: Inequality in the Age of Finance," argues that inequality from the Recession has a lot to do with how the government designed its response.
The recession exacerbated a persistent wealth gap in the U.S.
Mario Tama/Getty Images
Reforms during the Great Depression restructured the financial system by restricting banks from risky investment, Wall Street from gambling with household savings and lenders from charging high or unpredictable interests.
The New Deal, a series of government programs created after the Great Depression, took a bottom-up approach and brought governmental resources directly to unemployed workers.
On the other hand, the regulatory policies since the financial crisis that began in 2008 were largely designed to restore a financial order that, for decades, has been channeling resources from the rest of the economy to the top.
In other words, the recent recovery was largely focused on finance. Governmental stimuli, particularly a mass injection of credit, first went to banks and large corporations, in the hope that the credit eventually would trickle down to families in need.
The conventional wisdom was that banks knew how to put the credit into best use. And so, to stimulate economic growth, the Federal Reserve increased the supply of money to banks by purchasing treasury and mortgage-backed securities.
But the stimulus didn't work the way the government intended. The banks prioritized their own interests over those of the public. Instead of lending the money out to homebuyers and small businesses at historically low interest rates, they deposited the funds and waited for interest rates to rise.
Similarly, corporations did not use the easy credit to increase wages or create jobs. Rather, they borrowed to buy their own stock and channeled earnings to top executives and shareholders.
As a result, the "banks and corporations first" principle created a highly unequal recovery.
Who lost in 2009?
The financial crisis wiped out almost three-quarters of financial sector profits, but the sector had fully recovered by mid-2009, as we covered in our book.
Its profits continued to grow in the following years. By 2017, the sector made 80% more than before the financial crisis. Profit growth was much slower in the nonfinancial sector.
Companies outside of the financial sector were more profitable because they had fewer employees and lower wage costs. Payroll expenses dropped 4% during the recession and remained low during the recovery.
The stock market fully recovered from the crisis in 2013, a year when the unemployment rate was as high as 8% and the single-family mortgage delinquency still hovered above 10%.
Median household wealth, in the meantime, had yet to recoup from the nosedive during the Great Recession.
The racial wealth gap only widened, as well. While the median household wealth of all households dropped around 25% after the burst of real estate bubble, white households recovered at a much faster pace.
By 2016, black households had about 30% less wealth than before the crash, compared to 14% for white families.
As the government debates a stimulus package, officials can either decide to continue the "trickle-down" approach to first protect banks, corporations and their investors with monetary stimuli.
Or, they can learn from the New Deal and bring governmental support directly to the most fragile communities and families.
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Construction of the $500 billion dollar tech city-state of the future is moving ahead.
- The futuristic megacity Neom is being built in Saudi Arabia.
- The city will be fully automated, leading in health, education and quality of life.
- It will feature an artificial moon, cloud seeding, robotic gladiators and flying taxis.
The Red Sea area where Neom will be built:
Saudi Arabia Plans Futuristic City, "Neom" (Full Promotional Video)<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="c646d528d230c1bf66c75422bc4ccf6f"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/N53DzL3_BHA?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
Many of the most popular apps are about self-improvement.
Emotions are the newest hot commodity, and we can't get enough.
Frequent shopping for single items adds to our carbon footprint.
- A new study shows e-commerce sites like Amazon leave larger greenhouse gas footprints than retail stores.
- Ordering online from retail stores has an even smaller footprint than going to the store yourself.
- Greening efforts by major e-commerce sites won't curb wasteful consumer habits. Consolidating online orders can make a difference.
A pile of recycled cardboard sits on the ground at Recology's Recycle Central on January 4, 2018 in San Francisco, California.
Photo by Justin Sullivan/Getty Images<p>A large part of the reason is speed. In a competitive market, pure players use the equation, <em>speed + convenience</em>, to drive adoption. This is especially relevant to the "last mile" GHG footprint: the distance between the distribution center and the consumer.</p><p>Interestingly, the smallest GHG footprint occurs when you order directly from a physical store—even smaller than going there yourself. Pure players, such as Amazon, are the greatest offenders. Variables like geographic location matter; the team looked at shopping in the UK, the US, China, and the Netherlands. </p><p>Sadegh Shahmohammadi, a PhD student at the Netherlands' Radboud University and corresponding author of the paper, <a href="https://www.cnn.com/2020/02/26/tech/greenhouse-gas-emissions-retail/index.html" target="_blank">says</a> the above "pattern holds true in countries where people mostly drive. It really depends on the country and consumer behavior there."</p><p>The researchers write that this year-and-a-half long study pushes back on previous research that claims online shopping to be better in terms of GHG footprints.</p><p style="margin-left: 20px;">"They have, however, compared the GHG emissions per shopping event and did not consider the link between the retail channels and the basket size, which leads to a different conclusion than that of the current study."</p><p>Online retail is where convenience trumps environment: people tend to order one item at a time when shopping on pure player sites, whereas they stock up on multiple items when visiting a store. Consumers will sometimes order a number of separate items over the course of a week rather than making one trip to purchase everything they need. </p><p>While greening efforts by online retailers are important, until a shift in consumer attitude changes, the current carbon footprint will be a hard obstacle to overcome. Amazon is trying to have it both ways—carbon-free and convenience addicted—and the math isn't adding up. If you need to order things, do it online, but try to consolidate your purchases as much as possible.</p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a>, <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank">Facebook</a> and <a href="https://derekberes.substack.com/" target="_blank">Substack</a>. His next book is</em> "<em>Hero's Dose: The Case For Psychedelics in Ritual and Therapy."</em></p>
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