The Economy’s Lost Decade

It has been a bad ten years for the economy. It may in fact have been the worst decade since the 1930s. As I’ve written, the current recession is in some ways as bad as or even worse than the Great Depression. We have lost a historically large number of jobs, and they have been historically slow in coming back. And even though the economy recently began adding jobs again, it could be years before we return to anything like full employment. If you doubt how bad it has been, consider this: the last decade was the only decade with no job growth since the 1930s.

In a recent post on why working Americans are so angry, Ezra Klein leads with a startling graph comparing the last decade with the decades before. The graph shows that while the number of non-farm jobs grew by at least around 20% in every other decade since the 1930s, we added virtually no jobs in the 2000s. It’s not just that the recent recession wiped out more than 8 million jobs. Although high asset prices made the economy seem healthier that it was, job growth was actually sluggish throughout the decade. Our GDP grew less than 18% over ten years, more slowly than in any other decade since the 1930s, and just half the rate of the previous three decades. And when the asset price bubble burst—causing home values and stock prices to crash—it wiped out a huge part of our national net worth, making it the only decade for which data is available in which the average net worth of the American household actually declined.

Klein juxtaposes the chart with a remarkable speech given by AFL-CIO president Richard Trumka at Harvard’s Kennedy School last week. Trumka argues that for the wealthiest 10% of our country globalization has largely meant that everything has gotten cheaper and easier. But, he says, for the rest of us, the reality has been different:

It has meant trying to hold on to a good job in a grim game of musical chairs where every time the music stopped, there were fewer good jobs and more people trying to get and keep one. Over the last decade, we lost more than 5 million manufacturing jobs—a million of them professional and design jobs. We lost 20 percent of our aerospace manufacturing jobs. We’re losing high-tech jobs—the jobs we were supposed to keep.

With the costs of education and health care and education rising, it has been hard for most us to keep up. And with the recent recession wiping out jobs as the population continued grow, we need to create 11 million new jobs just to get back to where we were. People in the media and in the government who have steady jobs may not get the pain the unemployed are feeling. But it’s no wonder, as Klein says, that Americans—from Tea Partiers on the right to progressives on the left—are so angry.

It’s too simple to just blame globalization for this. But Trumka is probably right when he says the fundamental problem is that we tried to “have a low-wage, high-consumption society and paper over the contradiction with cheap credit funded by our foreign trading partners and financial sector profits made by taking a cut of the flow of cheap credit.” The truth is, we can’t continue to consume more than we produce. We have to begin to reinvest in our workforce, both to alleviate the pain workers are feeling and to get our economy moving again.