Today I recommend two articles on the web that explore the economic implications of our bubble economy for Americans.
The first article is found at Naked Capitalism titled, "The End of a 30 Year Wealth Bubble." Although the article emphasizes how the collapse of the dot.com and then housing bubble have impacted wealthy Americans, it also explores growing inequality in the U.S.
See below for my thoughts on growing inquality.
The second article is available at the American Prospect and is titled, "The Assault on the Black Middle Class." This is a very relevant article because income growth has stalled for most Black Americans and inequality between Blacks and Whites appears to be growing again.
Now for my thoughts on the economy. Automation and globalization have together eliminated the types of jobs that allowed working class Americans to live a dignified, albeit modest, lifestyle and that enabled them to pay for their kids college.
That is hardly news. The bubble economies of the dot.com and the housing bubble masked stagnating wages. The availability of easy credit allowed people to live beyond their wages and to purchase houses that seemed to rise in value, producing what has been described as a "wealth effect."
The question is what now? Economists predict that jobs lost in this recession are not going to return any time soon.
Bernanke's efforts to re-ignite the housing bubble are doomed to failure, although he has been able to re-ignite some demand in low end properties that are either distresed or have been made available to first time buyers through government guarantees and incentives.
Foreclosures are rising, especially among prime borrowers. Foreclosures are not expected to peak until the end of 2010. See calculated risk and doctor housing bubble for some very good analyses on the housing market.
Foreclosures will keep property values low and inventory high, dampening the housing market and making it difficult for builders who sell anything but the low end for some time.
Retail sales will remain low, relatively speaking, because of what is being described as the "great de-leveraging" as consumers attempt to pay down debts, since they are unable to roll over their debt through credit.
Oil prices will go up again after the global economy resumes growth. This will cause problems for U.S. consumers. Indeed, a number of analysts believe that high oil prices are what caused our latest bubble economy to pop. There is a good analysis on this currently on Market Oracle but I've read quite a few others as well.
What industries will employ currently unemployed workers? What industries will employ graduating college and high school students?
Several years ago a Rand report argued that job growth trends predominate in low income sectors, such as home care aides. The report was written by Lynne Karoly and can be found at the Rand Corporation's homepage. The upshot of the report was that workers need to be trained to start their own businesses, since there will be few decent paying jobs available.
The trouble is that most self employment (excepting high paid professionals such as dentists) is in services. Service work in general tends to be relatively low paid and offers few benefits. Self-employed service work will be challenging as many "entrepreneurs" chase the few individuals with enough discretionary income to pay for services.
Self-employed workers will struggle to pay for health care. Currently, my basic EPO family health care plan runs about $1,400. There is no way most self-employed service workers are going to be able to afford such high premiums.
The upshot is that without centralized planning and investment, our economy seems unlikely to be able to sustain the majority of the population in any form of what we currently consider a "middle-class" lifestyle.
Some have described our emerging 21st century economy as a form of "neo-fuedalism."
Today's WSJ reported that "Developing World's Parasites, Disease Hit U.S." The article explores how parasitic diseases endemic to poor countries are invading the US.
I suggest that this invasion metaphorically illustrates how much of the developing world's parasitic wealth structure--where the vast majority are impoverished and a few exploit their nation's economic and environmental wealth--will come to define our own existence as our productive industry disappears, our labor laws are gutted or evaded, and our laws and decision making continue to allow and reward excesss, greed, and corruption.