Author and humorist Mark Twain supposedly said that, “A lie can travel around the world while the truth is putting on its shoes.” The part of our human nature behind all that speed also explains the staying power of untruths: We worship the truth, but we often prefer the company of lies.
One of the more famous lies of that type was made up about Charles E. Wilson, a guy who had resigned as chairman of General Motors to serve as President Eisenhower’s secretary of defense.
At his confirmation hearings, Wilson was asked about possible conflicts of interest that might arise because he had declined to sell his General Motors stock to take the Cabinet post. It was widely reported that he replied, “What’s good for General Motors is good for the country,” one of those statements that seems increasingly arrogant the more you think about it. The only problem is he never said it.
His reply was that he could not imagine any conflicts of interest arising, “… because for years I’ve thought what was good for the country was good for General Motors and vice versa.”
What he believed was that the interests of corporate America and America itself were identical. And although we didn’t know it at the time, Wilson’s testimony was the high water mark of that belief, which was widely held then.
By the end of the Eisenhower Administration eight years later, the outgoing president was warning us about the dangers of the “military-industrial complex,” and for that, as well as a number of other economic and social reasons, American attitudes toward business would never be the same.
The change in attitude was gradual, and is still not universal. Even after decades of stagnant income, foreign outsourcing, and permanent job insecurity, we still fall in love with some consumer products, beatify the brands and celebrate the individuals responsible for selling them to us.
This most recent recession, though, has revealed a new dimension of divergence between American business and those who depend on work for their livelihood. It was there before, but is now available in high-def.
Workers are seeing that many corporations are doing quite well these days while many Americans don’t have jobs or are vastly underemployed.
Professor Mark J. Perry produced a simple graph that shows what happened. He is a professor of economics and finance at the University of Michigan’s Flint campus, and his graph pinpoints the source of our unhappiness with the economic recovery.
In the years before the recession, our total economic output — measured by Gross Domestic Product (GDP) — grew in tandem with civilian employment. And when the recession hit in 2008 they both declined at about the same rate. One was clearly tied to the other.
But around the middle of 2009, our total output began to recover and the GDP began to grow. Employment, however, was left behind and continued to decline. And when the jobs total eventually did begin to recover nine months later, something had changed.
The employment recovery wasn’t just lethargic, although it was certainly that. Jobs were only increasing at only about half the rate of the GDP growth. Employment and GDP were still linked, but not tied together as tightly.
There was an even more dramatic difference, though. The time lag between when the GDP began its recovery and when employment finally began to grow again had created a gap of over 6 million jobs — a gap that would never be closed if jobs continued to grow at only half the rate of overall economic output.
It was as if the recession had pushed American businesses into some sort of employment bankruptcy proceeding and shed 6 million jobs as if it were leaving behind debts owed to its creditors.
The painful beauty of economics is that it doesn’t just whisper about what we don’t know; it sings it out with ear-busting volume. We don’t know what caused this sudden, dramatic change in the jobs-output equation and we don’t know if it is permanent or temporary.
What we do know at this point is that it presents us with a problem that is unlikely to be solved with the economic policy tools of the past. Stimulus programs such as low interest rates, money supply growth and government spending programs are not likely to solve this problem — which explains their unimpressive performance thus far. The math just doesn’t work.
People need work to make America work. We really need to solve this jobs problem before we mortgage our future and unintentionally squander our human and financial resources on ineffective policies. Or we can prefer the reassuring company of those policies. It’s our choice.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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