Yale Daily News - US Economy - Depression, not recession, looming in America - by Hugh Baran

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Depression, not recession, looming in America - by Hugh Baran

While it seems that the nation’s leaders are still hesitant to use words like “recession,” the grim reality is that they may need to adopt a new word altogether — depression. People no longer trust assurances that fancy financial instruments will function the way they’re supposed to — after all, they know what happened to people who thought their subprime-backed securities were safe, AAA-rated investments.”Many are also pointing to the massive cost of the war — which is approaching $3 trillion, according to a new book by Joseph Stiglitz and Linda Bilmes — as a major cause of this recession. But our problems predate this war. A real similarity between our current moment and the Great Depression is the massive growth in income disparity that has emerged as the dominant feature of the economic and social landscape. In March 2007, two leading economists reported that the top 1 percent of Americans, whose incomes exceed $350,000, received the largest share of the national income since 1928, the eve of the Depression. The income of the top 300,000 Americans nearly matched that of the bottom 150 million combined. Furthermore, the size of this gap has doubled since the 1980s.

Income disparity is no accident. Rather, it is a deliberate result of the increased power and wealth of multinational corporations over the last several decades — the result of deregulation, free trade and globalization, coupled with the vicious attack on organized labor and workers’ rights in our country today. These conditions have allowed corporations and private capital to run amok in our economy, producing outcomes like the subprime disaster that triggered our current economic crisis. They’ve also allowed the elite new and dangerous ways to accumulate capital — particularly through the rise of hedge funds and private equity investing, which are rapidly reshaping the American economy.

The New Deal was, at its core, a response to these same kinds of problems. It represented an understanding that, as long as such enormous income disparity persisted, the economy would be in ruin and working people would remain unable to provide for their basic needs. While the New Deal made major strides in reversing income inequality, the proliferation of right-wing public policies have returned us to a similar economic breaking point.