This is an excerpt from the edited text of a talk the author gave to the North Brooklyn branch of New York City DSA in July 2020. It has been republished with the author’s permission. You can find the full text in Socialist Forum‘s special issue on the COVID crisis.
Long ago I was a right-winger, fervently but briefly, and the title of this little talk, “Reflections on the Current Disorder,” was one that the dreadful old reactionary William F. Buckley used as his all-purpose evergreen when he was asked what he was going to talk about. Just a tasteless joke, sorry.
This is not your typical recession. Back in the old days, meaning three or four decades after the end of World War II, there was a textbook pattern to the business cycle. After a few years, an expansion would mature, the stock market would get exuberant and frothy, labor markets would tighten (meaning wages would start to rise more rapidly than the employing and owning class liked, because tight labor markets increase workers’ power), inflation would pick up, and the Federal Reserve would raise interest rates to provoke a recession. Stocks would decline, the overall pace of business would slow, unemployment would rise, and wage and price pressures would ebb. The employing and owning class would then feel better about the balance of forces, the Federal Reserve would lower interest rates, and recession would turn into recovery and expansion.
All that began to change with the onset of the neoliberal era forty years ago. The deep recession of the early 1980s crushed labor and led to a massive onslaught on unions and deep cuts in social spending. Wall Street went wild with takeovers and restructurings that led to job cuts, wage cuts, and speedup. The capitalist class, firmly in the driver’s seat, demanded higher profits and higher stock prices above all other priorities.
This has undoubtedly been a great time to be rich. But things haven’t been so great for everyone else. And the whole system got more unstable. Instead of the neat boom and bust cycle I described earlier, we had insane bubbles, reckless speculative manias that would end in crashes. The first was as the leveraging mania 1980s turned into the 1990s; the second, as the dot.com mania of the 1990s turned into the 2000s, and the third as the housing mania of the early 2000s ended in the 2008 crash. Each recovery from those crashes got weaker and weirder, with the very upper brackets making out like bandits and much of the rest of the population feeling like the previous recession had never ended.
The point of this compressed history is that the US economy was getting sicker for a long time. Neoliberalism, by which I mean the belief that markets should be insulated from any political influence and capitalists should be free to do as they please with little restriction, had seriously undermined the system’s integrity. (When I say insulation from political influence I mean of the humane sort. Intervention to make the rich richer, or bail them out when they hit a wall, was perfectly ok—encouraged in fact.) The competence of the state, military and police functions aside, were consciously eroded. Public investment was squeezed, and our physical and social infrastructure left to rot. Class and racial disparities in health widened along with income inequality and economic precarity. Debt levels kept rising, and the cult of maximizing stock prices meant corporations didn’t invest or hire. Many borrowed money just to buy their own stock to raise its price, leaving them in weak financial shape when this crisis hit.
This economic crisis is different from both sorts I’ve been describing. It’s not the garden-variety recession of the post-World War II decades, nor is it like the financial crises of the neoliberal era. It’s the result of mass illness disrupting normal economic life, making it impossible for people to work (though of course many were forced to at great peril) or shop or do all the things that keep the wheels of consumption and production spinning.
But this crisis hit a system that had been structurally weakened because of the systemic rot—the erosion of state capacity, declining health among a lot of the population, increasing financial fragility, inequality, precarity, and the rest. Fragility and precarity are widespread even in what are nominally “good” times.
According to an annual survey of economic well-being by the Federal Reserve—an institution that ironically shows more interest in the topic than most others in US society— done last October, when the unemployment rate was under 4%:
- 16% of adults were unable to pay their monthly bills in full, and another 12% said they couldn’t pay if they were hit with an unexpected $400 expense.
- Over a third couldn’t meet an unexpected $400 expense either out of savings or using a credit card they’d pay off at the end of the month. The rest would either carry a credit card balance or throw up their hands in despair.
- One in four skipped medical or dental care because they couldn’t pay.
- Almost one in five had unpaid medical debt.
These are averages. It will not surprise you to learn that white people did better than average, and black and Latino people did worse. For example, almost four in five white people were doing ok or living comfortably, compared with about two in three Black and Latino people. You could turn that around, though: even in a relatively good year, one in five white people were barely getting by. Almost four in five straight people (yes, I was surprised the Fed asked this question) were doing at least OK, compared with two in three identifying as lesbian, gay, or bisexual.
Dimensions of Crisis
So that was the situation going into this hellscape. In June, the official unemployment rate was over 11%, three times what it was when the Fed took that survey last year. Unemployment had come down from a peak of almost 15% in April, as people were recalled to work, but that 11% is higher than any month between May 1941 and April of this year. It never got that high during the deep recessions of 1982 and 2008–2009. Under this definition of unemployment, you have to have looked for work in the previous month. If you broaden the definition to include people who’ve given up the job search as hopeless and those who are working part-time but want full-time, it was 18%. Though down from April’s peak, it’s still higher than at any point during the Great Recession of a decade ago.
And it looks like the late spring recovery has run out of steam. Well over a million people a week are still applying for unemployment insurance, and over 30 million are collecting benefits. Not quite half those beneficiaries are on the rolls because of expansion of eligibility to freelancers and other who would not have been eligible under traditional programs.
That expansion of unemployment insurance eligibility was part of the first pandemic relief package, the so-called CARES Act. The CARES Act also included a $600 weekly benefit on top of the normal state benefits. Benefits vary widely by state, ranging from $550 a week in Massachusetts to $215 in Mississippi. (Most southern states pay well under $300.) The national average pre-supplement was $342. So that $600 supplement made a huge difference to millions of people. It has now expired.
As I wrote last week in Jacobin, the unemployment insurance provisions of the CARES Act were the most generous welfare state measures in our ungenerous history. Job losses from late March onward resulted in steep declines in wage and salary income—almost twice as bad as the declines after the 2008 financial crisis and exceeded only by the onset of the Great Depression in the early 1930s. But those declines were more than offset by the huge increases in unemployment insurance benefits, along with the $1,200 checks. These payments were so large that personal income actually rose overall despite the giant hit to wage and salary income.
Personal consumption spending collapsed in late March and early April but stabilized almost the very day the CARES Act passed and began rising when the payments started flowing. According to near-real-time tracking of debit and credit card spending compiled by the Opportunity Insights project, led by the extremely energetic economist Raj Chetty, spending nearly recovered to pre-crisis levels by mid-June. (The graph below is updated from the one in Jacobin. Opportunity Insights is now reporting weekly, not daily, data.) Since then, they’ve begun to slip—and now that the $600 emergency payments have stopped, we can expect them to fall sharply.
Despite the payments, food banks have been doing record business. According to a new experimental weekly survey from the Census Bureau, there’s been a decline of over 30 million people in the number reporting that they’re getting enough of the food they want. Most, 25 million, say they’re getting enough food, just not what they want, and the rest, almost 5 million, don’t have enough to eat at least some of the time.
These numbers are, of course, aggregates. Lots of people almost certainly haven’t been so lucky. Many reported huge difficulties in filing for unemployment insurance because our systems are so antiquated. Bloomberg—the news service, not the billionaire ex-mayor—was out with a story earlier today that estimated that as much as a quarter of benefits went unpaid because of bottlenecks.
Read the full article in Socialist Forum.