Published by Doubleday
Publication date: October 2nd 2012
Genres: Business, Non-fiction
By fall 2010 there were 14 million officially unemployed Americans—40 percent of them classified as the long-term unemployed. An additional ten million were working part-time but said they wanted full-time jobs. Fifteen million more had dropped out of the labor force since this recession began.
There is no shortage of books on what is known as The Great Recession but, by and large, they are business tomes, chock full of statistics and incomprehensible explanations from analysts or finance professors. Barbara Garson’s Down the Up Escalator: How the 99% Live in the Great Recession is a welcome relief for anyone who would like to understand what just happened to us but doesn’t have a degree in finance. She looks at the anecdotal impact of the recession by contacting people and interviewing them—old style reporting. Garson’s manner is folksy and laid-back so the book reads like a series of stories but don’t let that mislead you. These stories are interspersed with well-researched statistics that enlighten even as they may dishearten.
In writing Down the Up Escalator Garson looks at three main components of American life: our jobs, homes, and savings. Within each section she meets with different groups of people impacted by changes in that sector. In addition, she looks at the changes in attitude and demographics that have occurred in the United States in the last 40 years. For many, especially regarding work, the loss of cradle-to-grave employment and the increasing lack of corporate loyalty to employees had led to a new attitude towards work. Often there was no longer the gung-ho-get-ahead mindset but a more realistic belief that
They were content to remain in their mid-level positions giving a little more than a fair day’s work for a fair day’s pay. Beyond that fair day’s pay, the reward they most cherished was appreciation for helping the work go smoothly for the people around them.
Unfortunately, even adjusted expectations were too high in this recession and companies reacted in the easiest way—increase earnings by decreasing workforce. And how those profits grew.
Corporate profits were 25-30 percent higher at the official end of the Great Recession than before its onset. Meanwhile, wages as a share of national income fell to 58 percent. That’s the lowest the wage share of income had been since it began to be recorded after World War II.
But not everyone was caught in this wage stagnation.
Between 1976 and 2007, 58 percent of every new dollar of income generated went to the top 1 percent of households.
This ongoing attitude of live-and-let-die has made even the most jaded worker fearful. Garson’s interviews with a long term commissioned sales person at one of the large boutique chains revealed that
… in some of the stores they’ve taken all of the full-time and made them part-time. And with that there’s no more sick days, no more vacation days, no more personal days for anyone…I think their ultimate goal is to have all part-time salespeople working shifts of four and a half hours. That way they’re not responsible for lunch, they have a lot of bodies, they pay no benefits, and it’s a constant turnover.
So, even those who want full-time work are finding it difficult to get.
No book on the recession would be complete without a section on homes and Garson’s is replete with stories of people on both sides of the fence. It becomes clear that the jobs situation of the last forty years (increased hours, stagnant pay) played a part in the mortgage meltdown. While there is plenty of blame to go around, the consumer side of the problem is not as cut and dried.
The wild mortgage lending wasn’t dictated by masses of poor people storming the banks demanding credit. It was fueled by a relatively few people with large piles of money that desperately needed to be invested. Hedge fund owners, pension fund managers, and European bankers are among the folks who bought mortgage-backed securities.
The way to make a profitable investment on a large scale was to create a completely unregulated product within the financial world (credit default swaps) that later failed on an epic scale, but while the government bailed out AIG and Goldman Sachs (and a number of their peers) there was no such forgiveness of personal debt. As Garson points out this has created a return to business as usual on Wall Street but in a way that is rapidly stretching the standards of ethics. There are no longer mortgage credit default swaps but there are new unregulated products out there for institutional investors.
The last time a big bookie, AIG, went broke, the U.S. Treasury made good on all its uninsured, unregulated markers. So, of course, everyone is returning to the track on the assumption it will do so again. By strengthening the assumption that there is no real risk, the government is fostering what is called moral hazard.
The final component Garson investigates is our money. The days of 3% interest are so long gone as to make the term ‘savings’ feel like a joke and few people have seen a return of gains great enough to repopulate their decimated retirement accounts. All of this is leading to what is now becoming familiarly known as the 1% vs. the 99%.
The earnings of the richest 2% have increased eightfold—eightfold. We haven’t had a disparity of wealth like that in this country since the Gilded Age.
There is a lot to absorb in Down the Up Escalator and none of it is good news but Garson’s down-to-earth manner keeps reader engaged and able to keep reading despite the enormity of the statistics backing up her prose. This is valuable reading for anyone who wants to understand the Great Recession or to be able to converse intelligently about it.