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søndag 5. februar 2012

Richard Wolf on the crisis of the American economy.

     The full lenght of this lecture is available here:          
The crisis in Europe is beginning to change its character from an economic phenomenon to become a political phenomenon. That’s how big is the issue, that’s how big is the problem. And the government on the edge of collapse now is the government of France and Mr Sarkozy whose popularity has dipped below that of George Bush in his worst month, and that is not a happy place for a political leader to be. Ok; here are the issues then I would like to address with you this evening.
First is the crisis over or is it deepening? I am going argue with you that it’s deepening. And second; what is being done and why isn’t it working. Because if the crisis is deepening, then all that has been done… then clearly what has been done doesn’t work. And I need to address a little bit why that might be. And then finally I am going to be so bold as to suggest to you what kinds of alternative solutions are going to have to be dealt with if we’re not going to suffer a downturn for an indeterminate amount of time. We hear a lot in our government and recent years about an open-ended, endless war against terrorism that seems to have no end, no boundaries. One of the thoughts I am going to leave you with is we may be entering into a much more important long term struggle with an economic decline that has no fixed dimensions and no boundaries either. 

Ok, so let’s turn first to whether this crisis is over or not. I don’t think so, not even close. We did have, and there was much attention paid to it, something called a recovery. It lasted from the depths of the bottom of the stock market, roughly march of 2009, and it was over by march of 2010. During that time, three things got a little better in the United States. Number one; the financial condition of our banks, particular our big ones.
Number two; there was a recovery of roughly half or so of what the stock market had lost. And number three; corporate profits rebounded from the worst times they have had in 2008 and 2009. All of those developments are now over. That is; if you saw today’s announcement, the second quarterly growth in the United States was about 1,6-1,7 %, that is a lever of growth that is inadequate simply to provide jobs for the new people entering the job marked. It can and will do nothing for all the unemployed. And indeed, the perspective now is that unemployment  - this is the official perspective of the Bureau of Labour Statistics – unemployment in the United States is likely to rise over the coming months. Not only not fall, but to rise. 

Bank situation has not gotten any better for several months now, after that recovery, same thing with cooperative profit, same thing with the stock market. I would submit to you that the recovery was a recovery only in part and for very limited sectors of the American economy, the sectors who were the beneficiaries of the massive intervention of the Unites States government starting in 2008. That money that was thrown at banks improved their situation. Let me remind you: the rationale for the focus on bank improvements buying their bad assets, which the government did, guaranteeing their obligations – ‘cause they couldn’t any more – which the government did and is still doing, all these things, throwing all these money at the banks, was given a rationale to unfreeze our credit system, to enable these banks to then make the loans to individuals and businesses that would get our economy going again. 

This was naïve, if not dishonest. As any banker would have told you, and has been willing to tell anybody who is willing to listen, the problem in 2008 was 1: that they had lent money to people they should never have lent to. Number 2: that we were an economy in free fall, and the last thing a prudent banker would do under those circumstances, is to make loans. Consequently, the banks took the money from the government, rebuilt their own balance sheets, improved their situation, and did not make loans, since that was the way to do that. So they made no public loans, in fact, what they did is turn around and use the money the government made available to them to buy the debts of the government, so it would have the money to help them. If you understand that, not only do you get an A in high finance, but you will understand the games that are being played in this crisis.
So that’s number one. Number two: The improvements in the stock market, which have now sputtered, and the improvements in the incorporate profits… In the case of the stock market, it was simply jumping into a very depressed marked, and bouncing back with it, which was done with money when it is very cheap to borrow money, and because the interest rates has being lowered so much, this was a game that could be played, and was played out for about a year, and is now over. In the case of corporate profits, they renewed because not only the government give all kinds of subsidies to stimulus program buying their output, but likely also they cut their rolls, they eliminated lots of workers, they pared everything down, which improved their profitability, but of course contributed to the unemployment. So what do we get?

We get at situation of improvement in three sectors: banking, stock marked and corporate profits. Well what happened to the rest of the economy across this time? Well perhaps the most dramatic statistic is an interesting statistic called the number of paid jobs available in our economy. That number, if I could show it to you, and I want to take the time to do it, is a straight line down from December of 2007 to the present. There are 6 % fewer jobs in the United States, paid jobs today, then there were when this recession began in December of 2007. That not only means we have less jobs for our people, but of course we have more people now than we did then. So we are again falling further and further behind. The unemployment rate shot up to around 10 % and has stayed there. Even more important; one of the particular unemployment rates – and by the way, the government keeps quite a few unemployment statistics, one of them called U.6, number six among the many unemployment measures, is an interesting number. 

And I bring it to your attention: It adds together three kinds of unemployment. The number of people looking for work, adults looking for work who are not finding it, the number we usually call unemployed, who by the way went from roughly 7 million in December of 2007 to 15, 5 million today. But it takes that number and it adds two other categories. People who have a part time job, even though they want a full time job, and people who have given up looking for work, who the statisticians give a wonderful name to: “discouraged workers”, which is one of those euphemisms you’d want to keep in your mind.

If you add together the unemployed, the involuntarily part time workers, and those who are discouraged and stopped looking, we are talking between 25 and 30 million Americans, an unemployment rate – officially – of a roughly 18 %. That means more than one in every six members of the work force of the United States in one of those categories. And that means every single American family has somebody in that situation. If not mother, father, son, daughter, then cousin, uncle, aunt or someone else. This is a crisis that affects everyone and continues to affect everyone. There is been no end to the level of unemployment, indeed, it is getting worse if you take the larger number. It is getting worse if you look at the number of weeks the average unemployed person is without work, which is at historic high, etc. etc. The same applies to foreclosures of homes, running now at 200-250 000 procedures begun in every mount in the United States, legal procedures to throw people out of their homes.

And if we look at the people who haven’t lost their homes, and who haven’t lost their jobs, here is what we find: The value of homes has dropped in the United States roughly 25 %, some places more, some places less, but as an average. Which means, if you own your home it is worth a good bit less than it was 2 ½ years ago. If you have a job, it has poorer benefits, lower benefits. If you have a job, it has less security associated with it, less opportunity for advancement. The conditions of the working class, the vast majority of people, have been horrible and not improved in a significant way for the duration. There is been no recovery. When you read about anxiety that there might be a double dip, for the vast majority of people there isn’t a double dip, because it never went up to dip again. It’s been a straight downward trajectory.
What does this mean? It means that the efforts of the Unites States government, massive efforts of intervention, unprecedented in some cases, undertaken by the Bush administration when it was still in power, and then done in bigger scale of anything by the Obama administration, has not succeeded. It has not ended unemployment, not come close. It has not stopped the foreclosure and loss of homes by millions of Americans, not at all.
It has done nothing to turn around the declining wage level, the declining benefit level, the declining job security, everything I have mentioned. It is not at success. And likewise, the regulation of the American economy, to which a lot of people looked both during this crisis and in the past, is also a story of pretty abject failure. 

Let me quickly remind you. In the last occasion when the American economy collapsed, 75 years ago in the 1930ies, we had a collapse in the scale of this one, worse, at least for the moment, than this one. But this is after all an economic system that has now collapsed twice in 75 years. The agency that keeps track of the ups and downs of the American economy is called the National Bureau of Economic Research. They are the ones that announced a few weeks ago that this recession ended in 2009. They keep track.
Between the end of the great depression and the beginning in the one we are in now, there were 11 according to them, business cycle downturns, during each of which millions of Americans lost their jobs, businesses went bankrupt, the economy turned south etc. etc. And some of them were very severe, like the one in the 1970ies, some of you may remember, when the New York City went technically bankrupt as a part of that wave of crisis. We live in a fundamentally unstable economic system, to which every effort has been applied, by republicans and democrats alike, to avoid it, to minimize it, to prevent it in the future. Every president since Franklin Roosevelt has not only supported whatever measures he put in place, as a way to get out of the recession they were in at the time, but every president, starting with Roosevelt, promised solemnly that the measures they were asking the congress and the people to support would not only get us out of the crisis we are in now, but – then there was a pregnant pause in front of the radio microphone or the TV-camera – make sure we don’t have this kind of crisis in the future, that we do not subject our children to what we’re going through.
Every president promised, and every president broke the promise, or where at the very least, if we’re to be kind, unable to deliver on that promise. That is why we’re in in one now, and that’s why we have so many and have them so regularly. So the armature of monetary and fiscal policy and regulation didn’t work. It didn’t work, at least not to prevent crisis. 

The 1930ties issued major regulations. They too had a bank collapse. They too had a financial credit freeze. They passed, in case you're interested, very important regulatory changes. Perhaps one of the most famous something called the glass steagall act in the middle of the 30ties. [1933] It was to prevent investment banks and commercial banks from mixing their money and their activities together. It was thought dangerous for banks that have a deposit they had to give back to you and me, to be able to use that money for long term investments in a company that they couldn’t liquefy, couldn’t get it back in the cash quickly. So a rule was passed.
These two banks have to be separated. If you do one kind of banking, you can’t do the other. We know what happened. Or if you don’t, I will quickly tell you. The banks who opposed that bill being passed in the thirties understood, as regulated businesses always do, that if you lose the struggle to prevent a regulation, there is still plenty of fight. You can work after there is a commission there, after there is an agency there, after the law is passed to make sure it doesn’t work in the intended ways. You can evade it, you can weaken it, and if you're strong enough, you can eliminate it. Glass Steagall is a perfect example.

First they designed ways to eliminate it, then they were able after a couple of decades to weaken it, and under the presidency of William Clinton, they were able to repeal it. And we’re now back to square one. The only difference is: the next set of regulations, all the regulated companies have accumulated half a century of experience in how to evade, weaken and eliminate, so they can now do it much quicker.
And we could see that in this last summer’s exercise in futility; the finance regulation bill. I won’t bore you with the details, but the amount of regulation that that bill will subject our financial industry to, is very small. It’s very small, because hundreds of millions of dollars were spent by the banks and hedge funds and others in the United States, lobbying the congress.
That’s legal, and they did that above board, to make sure the regulation was minimal. So let me make clear, in the hopes that you all get it; where did the banks get the money to lobby the government to minimize the regulations? From the government that bailed them out. So on behalf of the banks I want to thank each and every one of you for the kindness of providing the funds to make sure they were not encumbered by unfortunate regulation that they would prefer not to have. And I think you should feel good of being able to help them in their time of travail.
Ok. What did the government do in a fundamental way that we can summarize, ‘cause we don’t have all night, that might explain why none of this worked, why we have a deepening crisis. We are in the last months of the third year of this crisis. This hit in the autumn of 2007, we are now in the autumn of 2010. This is the third year with no end in sight. What is going on? Basically what the government did in all the bailouts and so forth, and in the stimulus programs, was to try to improve the balance sheets, the financial conditions of the financial industry, number one, and of industry in general, number two. That was the strategy. You unfreeze credit, you get the credit going again by taking care of the banks, making them whole again.
And there the largest thing the government did was basically an interesting act; they moved bad loans, bad assets, mistaken investments, off of the balance sheets of the private entities that had made them, and transferred them on to the governments balance sheet. We basically substituted the public depth for private depth. That doesn’t solve an economic problem, it just moves it. It displaces it from the private sector, which is in immediate danger, and has the government take over. 

If we had time I would now allow myself lots of sarcastic humour about a society that celebrates private and excoriates public having such a collapse, that everything becomes dependent on the public. Just give you one small statistic: 98 % of all mortgages written in the United States over the last eighteen months have either been guaranteed or purchased by the United States government. Without the United States government there would be no private mortgages written in the United States.
There would be no housing marked, the value of your apartment, if you own one, would have gone much further down than you’d seen now, and we would be talking about an economic crisis of gargantuan proportions. As a result, the Federal Government keep shovelling, and I use the term advisably, shovelling money into the agencies that buy all the mortgages that private banks – Fanny May, Freddy Mac – you’ve heard their names. They are all losing billions of dollars that taxpayers have funding, so that they can keep the housing marked going, because without the government, there wouldn’t be one. But I am not going to allow myself to sarcasm. I just want to focus you on what it means if the government comes in and supports an economy, either by taking the toxic assets of the bank balance sheets so they become property of the US government – short, yours – or the government borrowed money to stimulate the economy. Remember Obama’s 800 billion dollar stimulus. The payment for that was borrowed. So the government is taking bad assets on to its balance sheet, and it is borrowing record amounts of money; 1,7 trillion in the last year. 

Now let’s look at that for a moment. If the government borrows to stimulate the economy… - and by the way, why does it do that? Because individuals and businesses are not buying anything. They’re terrified of where the economy is going and they’re on a buyers strike. The government comes in and substitutes its own purchases for the purchases not being made by the private individuals and private corporations. So the government borrows. And our government has gone like governments around the world into massive, unprecedented levels of peacetime debt in order to do this. Not only is the government doing this, but this is put forward by all kinds of fellow economists and the public as a stroke of genius. As a deficit spending programme that is going to solve all our problems. As if borrowing like that has no consequences we need to worry about, a though we can blindly just borrow and it really won’t matter and it will not be a problem and we will fix that all in the future when our economy is healthy again. And then we will run surpluses, and that will negate the deficits and everything will be back to square one. I don’t mean to be unfair, but that is the position of my college, whom many of you read, Paul Krugman. That’s what all the governments been doing, borrowing like crazy. And it leads, among other things, to the following peculiar conundrum: When governments borrow, of course, there has to be a lender. 

Ok. Who is lending to the United States Government to carry out all of this? Well, here we have some peculiar answers. Number one: all kinds of wealthy entities, corporations, individuals, lend to the government. Because that’s safer and more secure than lending to anybody else in an economy like this or investing in anything, because things don’t look so good. That’s not a growth procedure, that’s a churning of money. In fact, it’s very ironical if you think about it. Because if our government really didn’t want to run a deficit, it could of course tax corporations and the wealthy. Then it could get the money to stimulate the economy without borrowing. It is even more interesting when you reflect that when the government doesn’t tax corporations and the rich, choosing instead to spend money that they gets by borrowing, it goes to the same people to borrow the money. From fore the standpoint of a wealthy person and a corporation, if one has to choose between the government taxing it – end of story – versus the government coming to borrow it, and use it for the same purpose, and then pay you back with interest, that’s not a tough call. I’d be Keynesian deficit spending supporter myself, if I were wealthy under these circumstances.

So governments have been borrowing. I haven’t the time again, but if I did, I would enjoy talking to all of you about something I suspect you know: that there aren’t enough Americans with enough of money willing to lend to the United States Government, so the borrowing we’ve been doing to keep our economy going has had to involve more and more borrowing by us from other countries. And the country in the world that has lend the most to the United States to help it out of the crisis of its capitalist system is The People’s Republic of China. 

The communist government in China is financing the crisis activities of the capitalist government of the United States. Probably worth a few moments of thought, but not for the media here. But maybe you might think that some historical message might be lurking somewhere in this relationship. And even if you don’t want to think about it, do think about this: If the estimates of the total amount of government and agency debt that the Chinese own is roughly in the neighbourhood of 1,2- 1,3 trillion, which are what the estimates suggest, then it means, assuming the usual interest rates, that the United States Government is now functioning as a collection agency for the People’s Republic of China, because every year we must send 50-60 billion dollars to them in interest. So you should all feel good when you drink a beer or buy a Robert Thyer or do anything to give money to the Federal Government. That part of that will not be wasted on services or anything like that, part of that is just a collection process, the government collect a portion of it, and sends it to the People’s Republic of China so they can build up whatever it is they’re doing over there, which seems to impress a lot of people. And again, on behalf of the people of The Republic of China, I want to thank each and every one of you for making this contribution. If that strikes you as a bizarre way to fix a crisis – good, that’s my point. And it doesn’t work. It doesn’t work. 

The stimulus didn’t work. Not only because it was borrowed money to which I will return, but if you stimulate, if you pump money into the economy… We are now in an economy that loses a lot of the money we have, because we import so much. Every one of you is wearing clothing that doesn’t come from the United States. You know that. And you’re driving cars that don’t come from… and so forth an so long. So if you give money to the United States, businesses and people, it’s hammered out of the United States. You're actually helping building jobs in other places with you stimulus. What is my point here? It hasn’t worked. The stimulus didn’t solve the unemployment problem, making the banks hold didn’t lead them to lend to produce jobs. It didn’t work. Monetary and fiscal policy didn’t work in these three years. And it shouldn’t have been even tried, because we knew it wouldn’t work.
And why do I say that? 

A little historical example: The last great collapse 1929. Once Roosevelt got in a few years later [1933], he tried every monetary and fiscal policy that the Obama administration used, he tried that too. And it didn’t work for him either. He kept trying; he kept running into the problems that monetary and fiscal policy lead to. He couldn’t solve those problems. And the great depression lasted from 1929 at least a decade, till 1939. We couldn’t get the unemployment back down to what it had been before the crisis hit. What finally got the United States out of the great depression, unemployment, was not an economic policy. Those didn’t work. 

It was a radically different policy, a radical difference in America. We decided as a nation to go to war. We took half our unemployed people and put them in a uniform, and we took other half and put then into work in factories to make the uniform, and the bullets and the guns. That’s how we got the unemployment problem solved. The lesson should have been learned; your normal run of monetary and fiscal policy about which the great debates every day in the press resound is a bit of a shadow boxing. It’s a bit of a distraction. 

You might even call the conventional debates between conservative and Keynesian economics a kind of weapon of mass distraction. Because meanwhile, what’s happening as they debate, as they go back and forth? [..]I would argue with you, and I hope you get this message, that while this shadowboxing debate is going on, while we’re all supposed to get terribly excited about whether you are in favour of deficit spending or you're not in favour of deficit spending… the cycle, the capitalist cycle is working its way through its normal process. And what is its normal process? 

A period of unemployment that is extended until workers are willing to work for lot less, because they’ve been out of work long enough, and the prospects look bleak enough, that a job and a salary they would not have accepted before becomes something we’ll have to settle for. Likewise at the cycle enfolds and businesses go out of business, the cost of second hand equipment drops, because the sellers who are desperately going out of business outnumber anyone who is buying. And rental cost of square footage goes down. And the lawyer you need to hire becomes desperate and will willing to work for less… and on and on and on. And when does it stop? When the costs of doing business have been broken down far enough so that a capitalist, an investor, a businessman or woman sees the prospects of profit at such low wages and such low cost, and then they go in, and then the system has another period of growth for two, three, four years, until we’re back in the same instability of this system, which no section or collection of brilliant economists has ever been able to figure out how to stop or control.
That’s what going on. 

And I submit to you, that’s why so many Americans are angry, because they live in this process. For them these debates are empty. They’re not moved, they’re not interested, and they are not drawn into them. The clever repartee is lost on them. They see insecurity, decline, and no end. Are we surprised that they’re rageful and angry, that Tea Party attracts them etc. etc.? I don’t see why. The people in that situation begin to look for scapegoats, somebody to blame; the nasty bankers, the awful immigrants or whoever. That’s also a par for the course. The history is full of this.
We don’t have a government with policy that can solve this problem, and they have proven that to us. But they have done something. They’ve now saddled the government with enormous debts. And that is the new problem. It’s a crisis displaced. 

It is not so immediate on the private sector, although heaven knows it is still there. But the urgent problem is the government. All around the world, all the governments; they’ve borrowed up till here. And so they are discovering a problem. And again, to be simple: What is the problem? When a government borrows you feel comfortable because it is the government, it is not just some person or some company. But if the government keeps borrowing and borrowing and borrowing, then the same anxiety of a lender that applies to a private borrower eventually applies to the government borrower too.

And here is how it works: You are a big bank, you are an insurance company, you are the kind of folks that lend to governments. And uou see the rising indebtedness, and you say to yourself: oh, oh… As the government debts rice, the government has to use more and more of its revenue just to pay the interest and pay back the debts. So more and more of the money that people pay in taxes doesn’t come back to them in the form of a service of a school or of a fire house, of an educational programme, of an unemployment check, of a social security benefit. No, no, no, that’s not available because the money has to go to pay off the lenders.

And the lenders are not stupid. They know that this is not a sustainable arrangement. The political risk is that movements will develop that turn on their own governments and say: What are you – handmaidens for the lenders?  Collection-ladies, bag-people collecting our money and sending it to rich lenders - because that’s who they are? Perhaps even foreign lenders. When in the United States for example will we awaken one day and have – I’ll be mean for a moment – have Glenn Beck on the TV excoriating the American people to rice up so we stop sending our hard earned tax dollars to the communists in China. Can this happen? Of course! Has it happened? - Repeatedly. Some of you may remember this summer, it happened to a country called Greece. The lenders to Greece looked to the situation, and they drew the following conclusion: The most militant labour movement, socialists and communist movement in Europe is probably the Greek population.

If you look at them all, it’s probably true. If any country is going to rise up and stop being willing to pay interest on debt rather than have needed services, it’s those people. So the lenders to Greece said we are not going to lend you any more money, we are not even going to renew the loans we have to you. It’s unsafe. So you have to do one or the other of two things: In order to compensate us for the rising risk we see with you, you have to give us a much higher interest rate than we’ve ever charged you before. Of course the problem for Greece would be if their people are angry at the amount of money they’re paying in interest now, they will be in a white heat of rage if they would actually have to pay. But the lenders where adamant; you either pay us much, much more, and we don’t care what happens in your country, or you’re not getting any loans at all. And in the case of Greece, as in many other countries, that would mean the government couldn’t function tomorrow. And whoever the political leaders are would be immediately thrown out by an enraged population that can’t go to work on the subway. 

Historical footnote: The government in Greece at this time, during this summer and now, is the Socialist Party of Greece who won the election and came to power a year earlier on the promise never to impose an austerity on Greece. But when the lenders came and said you either do what we tell you, or you’re not going to be here next week, the socialist party is imposing austerity on Greece, or trying to. Greece have had a dozen strikes in the last six months. It’s far from clear how that’s going to work out. So the problem is debts. And the lenders are beginning to say we want you all, including here in the United States, we want you to put money aside to make sure that the interest is paid and the money is paid back – or else we’re not going to lend to you. That’s a problem for the United States also now. Not the kind of problem it is for Greece. Greece is a small country, a poor country. Lending to them is more risky than lending to the United States. People prefer to lend here. But not limitlessly. 

In Washington right now, in case you haven’t being paying attention, the government of the United States is confronting mounting pressure from lenders about the debts that we have, and the debts we’re projected to have for the next several years, deficits each year, and demanding major adjustments, or else the lending to this country is going to start atrophy. Signs in the wind. The People’s Republic of China reduced by a 100 billion dollars its outstanding ownership of US treasury debt over the last year. First time they’ve done that. They are not keeping accumulate.. they’re not willing to keep lending. Lord help us if they dump the rest of what they have. Another sign in the wind: President Obama nominated a western politician to be the head of the commission looking into the social security and Medicare system. 

In order for the government to free up money to pay back the lending that it borrowed to solve the crisis in the ways I just showed you didn’t work. The only way to to that is to go after the really big costs the Unites States government has that are on the table. And those are social security, Medicare and Medic Aid. Ant there is already talk about changing either the amount that is given to those people who will get those benefits, or charging you more when you go to doctor if you are on Medicare, or all the other ways that this is being handled. 
And again: This is the transformation of an economic crisis into a political assault on the mass of people. That’s what austerity in Europe has meant as they cut back. The general strike in France that 2, 5 million people went out in the streets about, was a general strike on a very specific issue. The Sarkozy government in France proposed that social security eligibility be moved from age 65 to age 67 full coverage, and from age 60 to 62 for partial coverage. 2,5 million people in France said no,no, no, that’s not going to happen. And there are demonstrations on Saturday on the 2nd of October, and again on the 12th in France in front of the senate and the general assembly in Paris. 
This is becoming a war inside this society, we might even begin to say a civil war inside the society as to who’s going to pay for this. And much of what is happening in Europe are prefiguration of the same issues here. I’m sure we will handle them differently here. We do not have a unified powerful trade union movement. We had one once, we don’t have it now.  I just described to you countries that have had general strikes and demonstrations – we’ve had nothing. We’ve had three years of serious crisis – we’ve had nothing comparable. This Saturday in Washington, the NAACP, the AFL, CIO and many other organisations are having a demonstration, sort of, it’s like a conference, very mild, very peaceful, asking the president to do more about unemployment. That is a long way, for what you can see if you look on the internet, just tap in September 29. Europe, and you’ll have more photographs than you can possibly imagine of general strikes and all the street scenes of it. But I think it would be naïve to imagine that the American people just are going to roll over and accept the implications of making the mass of the American people pay steadily, step by step, for the immense costs of bailing out this economic system we live in, as it works its way through the second major collapse in 75 years. 

Let me turn then, and work my way to a conclusion about how this is all playing out here in the Unites States, which is the society I am most interest in and where I live. I think the mass of people have already come to the conclusion in this country, that things could have been handled otherwise, that somehow the only way to proceed was not to throw the money at the banks and take over their bad assets, was not to stimulate the economy by a stimulus program that buys lots of stuff from corporations in the hope that they will then hire people. It is a remarkable thing about the United States; these policies, even when they don’t work, seem to have such a hold on us that we can’t break free. Let me deal for a moment with what I think is a perception, even if it isn’t yet fleshed out with statistics, that’s partly my job, of a sense in the American people that something could have been done about the job circumstances, the unemployment, that wasn’t. We relied on an appeal to the private sector to hire that went nowhere. And then subsides in a form of demand by the government for products and hoped that that would stimulate companies to meet that demand by hiring people, and that didn’t work either in the sense of solving our problem. 

I think the American people understand there is another option, even if it couldn’t occur to them. And the reason they understand it, is first of all its very logical, but even more than that, it’s our history as a nation.
In 1934 Franklin Roosevelt, confronted with an unemployment larger than what we have now, went on the radio and he said to the American people: If the private sector either cannot or will not hire the people, then the government will do it. Thank you very much. Between 1934 and 1941 the government under Roosevelt, who was the president the whole time as you know, created 11 million jobs. 11 million jobs, directly hired by the government, to perform a task that the government assigned these people to do. They reclaimed all kinds of land. 
This was green economics long before the term existed. They build many of the national parks in the west that many of you I know have enjoyed. One of the most creative programmes ever devised in the United States, the WPA, amazing program. The government hired actors, singers, sculptors, painters, poets, grouped them into troops, and hired them and send them all over the United States, particularly into smaller towns an smaller cities, which had never had an opera troop perform before, or poetry lessons for the public at the public library on Saturdays, there was a distribution of culture to the American people greater than anything we have had before and anything we’ve had since. Wow. And those people all had meaningful work. And they all had an income, which mean they all could maintain their mortgage payments and didn’t lose their homes, and they felt real good about themselves. And all of that transmitted itself. Somewhere the American people understand at least the following question: Why in the world hasn’t that been done again? What’s going on here? If you repeatedly appeal to the private sector to solve the unemployment problem, and they either cannot or will not do it, what – you just sit there? But of course, there was a difference in the 1930, wasn’t there? We had an explosive labour movement. The congress of industrial organisations, the CIO, was sweeping American industry, organizing factories the way we never seen it before. 
This was a powerful labour movement that was flexing its muscles and letting the government know – as the Europeans are doing now – you’ve better do something. We had a strong socialist party, we had a strong communist party, again like Europe now, and so Mr Roosevelt had the mass demand and the mass support for taking a step, he might not have wanted to, but he really didn’t have much choice, and it at least reduced the unemployment. He could not get the congress to make the program big enough to solve the unemployment problem. But he was able to go a lot further, transforming the lives of millions of Americans – for whom by the way Roosevelt became a quasi-saint. And if you know about the shape of American politics and the growth of the Democratic Party, it was never the same after that period of time. None of that is happening. There is not a major effort by the congress or the president to even debate the question of a public employment program. 

And it is not as though we are importing it from Soviet Union or China, this is using a president of our own government, our own president, the same political party, and not that long ago. It’s remarkable. But it sits there as an awareness however unformed in people’s minds, of a gap between what could be done, and what is being done. And I think it’s having profound political effects as it begins to move inside the American people as a sense of anger and resentment at what is happening to them. And I think a fear, that this is going to continue.
A few supportive states.. earlier this week the US. Senses[?] Department released a report about poverty in the United States. If you missed it, poverty is getting worse in the United States, it is significantly worse. Millions of people added to the number of folks living below the poverty line etc. etc. Interestingly our poverty population is also changing in terms of age. Basically, the younger you are, the more likely you are to be poor. Which means that the impact of poverty in changing and damaging your life, is an impact we are going to have for decades into the future, since it disproportionally effects our young people. 

That is a very serious issue that deserves much more discussion than we’re having. I also want to bring your attention to the changing distribution of wealth and income. In the 1960ies, the United States was distinguished by having one of the least unequal economic systems in the modern industrial world. The gap between rich and poor was narrower in the United States than in places like France or Italy or so on. Now we are having the dubious distinction of having the most unequal of the advanced industrial societies. For thirty years our real wages in the United States, some of you know I work a lot on this have talked about it before, the real wages of the United States has basically gone nowhere. If you adjust the wages pr. hour of the average American worker for the price he or she pays for goods and services, that’s what the real wage means, it is about the same today as it was in 1978. 

And Americans have reacted to that by borrowing money, that is a way to keep consumption going, when your wages isn’t going up, is you borrow, going into an horrific debt, and work more hours and send more members of the household out to work, particularly adult women who moved out by the millions in fulltime work in the last thirty years. But when all the dust settles and you look at the numbers, the inequality got worse and worse because of it. More and more of the salaries of Americans are used to take care of their debts. And they are falling further behind. As the inequality grows, social tensions grow.
What is interesting is, in this crisis, the situation is getting worse. One of the reasons is that the crisis has disproportionately affected our housing industry. For most Americans that have any asset at all that is worth something, it’s their homes. It is by far the most important valuable piece of wealth that most Americans have. In at crisis like this, where average houses have dropped by 25 % you have devaluated the asset that most Americans count as their only significant piece of wealth. Therefore, their relative situation to the really wealthy has deteriorated, the gap has become more severe. And that is felt by the American people in the following statement that poll after poll shows us: A sense of a growing number of Americans that this country is going through some long, open ended period of decline in the world, felt as a political decline, a cultural decline, a military decline, and an economic decline. And they don’t know quite where to look and how to grasp all of its dimensions, but that sense and that feeling as important in shaping our future as anything else that is happening as a consequence of this crisis.

Transkribed by Ivar Bakke, Norway.