In lieu of an abstract, here is a brief excerpt of the content:

The Great Recession The damage done and the rot revealed 7 The unemployment rate in the United States stood at 9.6% in August 2010, well over double the rate that prevailed in the same month in 2007, the year before the Great Recession hit. August 2010 also marked the fifth anniversary of Hurricane Katrina making landfall on the Louisiana coast. Drawing parallels between Katrina and the Great Recession may sound like the beginning of an argument for complacency in the face of the worst economic crisis since the Great Depression—after all, you can’t change the weather. But the scale of damage done by Katrina wasn’t really about weather but rather the neglect of public goods and social institutions. The rain and wind didn’t manage to flood the city—the collapse of levees protecting it did. The weather in the days before the storm didn’t prevent residents from evacuating—many simply lacked the means or social networks that would have allowed them to leave as easily as those who could pay for a hotel room or call friends outside the city with extra rooms in their house. This mirrors many important aspects of the Great Recession. Economic shocks happen —that will never change and is indeed “like the weather.” But what determines how much human suffering these shocks leave in their wake is driven by social and political choices about how the economy is managed. It was not inevitable that the significant run-up in home prices that began in the late 1990s would end with more than 8 million Americans losing their jobs and unemployment hitting a 25-year peak. When policy makers failed to rein in a financial sector that was making bets on ever-rising prices, it proved ruinous for the larger economy: poor policy choices amplified what should have been only short-lived over-exuberance among home buyers and sellers into a full-blown economic crisis. In short, a key lesson to be taken both from the aftermath of Katrina and the Great Recession is that blaming simple fate for what has happened absolves those in power far too easily. The scale of casualties of both disasters were determined largely by political choices, not by immutable acts of nature. Another striking parallel was revealed in the crises’ aftermaths. Many Americans following the news coverage of Katrina were shocked to see the depth of poverty that many of their fellow citizens had fallen into. Thousands had been unable to flee the city simply because they lacked a car, money for a hotel room, or friends and family in locales safe from the storm’s reach. In the aftermath of the Great Recession, it has become apparent that the neglect of our most vulnerable residents had left them one F A I L U R E B Y D E S I G N 8 hard shove away from economic danger or even ruin—living without health insurance , having kids go hungry, evictions, or even flat-out poverty and bankruptcy. At the end of 2007, this hard shove came. This long-term neglect of vulnerable working families was matched only by our solicitude toward the most-privileged: the dismantling of regulations on the financial sector was undertaken with key policy makers voicing confidence that it was “self-regulating” and could be trusted to police itself for the social and economic good of all. Obviously, this was not the case. Ignoring the needs of the most vulnerable and catering to the desires of the most connected surely has nothing to do with the weather, or the market, or any other abstraction outside of our control; it is simply a choice that our political leaders made. In recent decades, Americans have been presented a number of false choices, false choices presented as gospel, with perhaps the most enduring being the claim that a more fair economy would result in a much less efficient one. There’s no evidence to believe this is true—increasing opportunities for those who haven’t won life’s lottery is as wise an investment for the future as can be made, and too many of the actual inefficiencies plaguing our economy are those that put thumbs on the scale for the interests of the well-off. Unfortunately, the project of decoding these false choices and charting a new economic path has to be started while the U.S. economy remains mired in an economic crisis. While the Great Recession officially...

Share