Sunday, November 23, 2008

What a Twenty-First Century Depression Might Look Like

There are a lot of arguments today on the blogosphere about whether we are really teetering on a Great Depression or whether the analogy is not quite correct.

I'll leave the prognostications about the economy to others. All I will say is that sure, things could continue to get worse. Then again, Obama could take office on January 20th with a $700 billion stimulus plan in hand and things could slowly start to turn around.

Either way, one thing is certain: we're in for some pain for a while. And if this crisis did turn into something approximating a real financial collapse, what we might see might be a whole lot different than the 1930's.

First of all, most of us may be losing retirement nest eggs. But if we have any savings at all, it's likely to be safe. We won't find ourselves suddenly out on the street without some kind of warning. The wealth we are losing now is largely something we planned on for the future. So even though the financial pain we have now might be lessened, that future we planned may not be as secure as we imagined, especially when the government runs out of money to supplement it. The stock market may not recover for decades either. In other words, our poverty will be more spread out for the rest of our lives, as our investments and government safety nets dwindle into our old age, instead of something we feel immediately.

Secondly, the pain is likely to be unevenly distributed geographically. Whole towns in Michigan and California might turn into ghost towns of empty, abandoned houses. But systems like ATMs, grocery stores, video games, the Internet, and gas pumps will likely still function, and areas in the Northeast, in the mountain West, may actually continue to function close to normal. Instead of Joads crossing a dust bowl, we'd have families downsizing to apartments and relatives all over the country.

Thirdly, jobs may disappear, but from what I hear from my laid off friends is that rather than work for companies, people are looking to become free agents, forming temporary project based associations to accomplish small tasks. However, with 30% of the country looking for freelance work, expect there to be stiff price competition. The average American will likely earn something close to the average Indian or Belarussian.

And so - this is how we get to our lower standard of living. This is the inevitable result of globalization and the end of empire. We don't become beggars in bread lines starving on the street. Instead, we move into smaller homes, smaller apartments, earn less, work harder, with little job security, and postpone or forget about retirement. We become a second world country, scraping by to afford food and shelter, and that's the Great Depression of the 21st Century.

Unless we do something to stop it.

No comments: