What Really Destroyed the Economy and How We Can Fix It

Riddle 1: When is a recovery not a recovery?

Answer: When profits are at record levels, corporations are sitting on $1.7 trillion in cash, and unemployment is still at 9.2% and rising.

Riddle 2: When is a stimulus not a stimulus? Answer: When it’s less than one-fourth the size of the hole in the economy it is intended to fill.

Riddle 3: When will it be possible to rebuild the economy? Answer: When the U.S. labor movement joins with community and international labor allies to demand global economic development, jobs, and rising wages.

When the U.S. housing bubble burst in 2008, putting jobs first was a no-brainer. Global unions demanded immediate action. The G-20—the group of 20 nations charged with coordinating a global response to the crisis—agreed. Governments rushed to do stimulus spending. The worst was prevented.

Then in the spring of 2010 the Greek debt crisis hit. Markets plummeted. The G-20 pulled back and told countries to cut spending. Greece, Ireland, Spain, Portugal, and the U.K. have since enacted austerity packages with drastic spending and wage cuts.

The global jobs crisis is now worse than ever. Between 2007 and 2010, 30 million workers lost their jobs worldwide. In the United States, GDP is falling, jobs have declined since the recovery started, and the unemployment rate is rising again as federal stimulus funds fade and layoffs mount in the states. The Brookings Institution estimates it will take over ten years to return to normal employment levels, even at pre-crisis growth rates. Now, real wages are falling as well.

Union reps negotiating contracts with state and local governments are on the frontlines of the resulting battles. Flanked as they are by terrified members on one side, and angry tax payers and state legislatures attacking wages, benefits, and bargaining rights on the other, their problems go far beyond what can be solved at the bargaining table.

The out-of-the-box solution would be to organize for a comprehensive program of job creation. Blueprints for jobs-based recoveries do exist. But such blueprints need “rank-and-file economists” to turn them into brick and mortar. With Democrats and Republicans actively vying to impose austerity, those rank-and-file economists—community organizers as well as union reps—must tell, not ask, our elected representatives what we need. Then they have to engage in the drawn-out battle to make what we need a reality.

A major obstacle to struggle is the widespread belief—even among many union members—that there is little that government can do besides cut spending, and that only the private sector can create jobs.

Yet the fact that so many are frustrated with government over the high unemployment is evidence that on some level people do believe government action is not only possible but necessary. A rank-and-file economics needs to channel that frustration and nurture that belief. It needs to explain why the “free market” isn’t going to create the jobs that are needed. It needs to educate people about the real causes of the crisis. And it needs to convince community and union members that a positive agenda for long-term growth still exists.

First, we have to arm ourselves by educating ourselves.

The Private Sector Can’t Do It Alone

Here in the United States, people are surrounded by the narrative that only the private sector can create jobs. Even those who acknowledge that we need to rebuild our infrastructure and that rebuilding would create jobs are likely to say that we can’t afford public investment right now. Instead, the argument goes, we should cut taxes and let corporations create the jobs and the investment we need: too much public spending got us where we are; every tax dollar spent by the government is one less dollar business could be used to create jobs.