I’ve been saying for a long time now that the economy has never been good in my lifetime. I make that as an honest and serious statement. It’s not hyperbole. The economy has not been good for at least 45 years. But, the official outlets (the government, news agencies, professional economists) have said differently. They often talk about the booming economies of Reagan, Clinton, and Obama, at least. I wanted to talk a little bit about where this disconnect comes from and why I think I’m right.
Economists use economic indicators to judge the economy. They look at things like Gross Domestic Product, Unemployment, Stock Prices, Property Values, and on and on. They use these indicators to determine the size and direction of the economy, whether it is expanding or contracting and by how much. The problem is when they try to translate the size and direction of the economy into good or bad.
Too often, people forget the relational nature of good and bad. Nothing is good or bad in itself. It is good or bad in relation to something. Red is not good or bad. It’s just red. When red, a rose for example, is seen by something that finds it beautiful, it is good. When red, blood for example, is seen by something that finds it horrifying, it is bad.
The economy is the same. A 2% growth in GDP is not good or bad in itself. A 4% drop in unemployment is not good or bad in itself. They are just statistics, but economists tend to talk about them as if they have inherent value, as if they are good or bad in themselves. A growing economy is a good economy. A shrinking economy is a bad economy. The more growth, the better (I’m oversimplifying, of course, economists do worry about unstable growth and they do celebrate market corrections).
The catch here is the relationship that is being used to determine good and bad. Economists compare an economy to itself at different points in time, or they compare one economy to another. But those aren’t the relationships that matter. The relationship that matters is between the economy and the people who live in that economy. The 2012 economy might have been growing while the 2008 economy was shrinking, but that doesn’t tell us if either of them were good or bad. To find that out, we have to look at how the people were doing in those years.
In the past 45 years, the people haven’t been in very good shape. Some people have done very well, but most people have either stagnated or gone backwards. The supposed good economy of the 1980s saw the destruction of organized labor making workers less secure than they were before. The supposed good economy of the 1990s saw a dramatic rise in underemployment while increases in the cost of health care and education far outstripped salaries. The supposed good economy of the 2010s was fueled by the rise of the gig economy which leaves workers less secure than they were in the 80s. 2012 might have been better than 2008, but that doesn’t make it good if too many people are still suffering.
That’s the bottom line. For all the growth and booming markets and real estate peaks achieved during my lifetime, there has always been a large and persistent group of people struggling. There are many reasons for this, but the economy has not done anything to help fix it. Until that happens, I can’t call the economy good.