Obama’s Economic Legacy: Recovery for the Architects of Financial Crisis
Underpinning people's rage towards the establishment is the sense that modern capitalism is no longer working, says economist Richard Wolff
Underpinning people's rage towards the establishment is the sense that modern capitalism is no longer working, says economist Richard Wolff
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries coming to you from Baltimore.
The final monthly jobs report for the Obama Presidency is out. Obama is leaving office with an unemployment rate of 4.7%, down from the 10% he inherited after the 2007 to 2008 financial crises. Over 11.3 million union jobs were created during the Obama years, and over two million of those jobs were created in 2016.
But these new stats should be put in context of a recent economic study done by Princeton and Harvard University by Lawrence Katz and Allen Krueger, the paper titled, “The Rise and Nature of Alternative Work Arrangements in the United States, 2005 to 2015.” And it shows that almost 95% of the jobs created in the decade were positions that often lack legal protections, health insurance, pensions and job security, essentially what we call contract work.
Here to take a longer view of Obama’s legacy for workers, is Richard Wolff. Richard is a Professor Emeritus in Economics at the University of Massachusetts Amherst, and currently a visiting Professor of Graduate Program, in International Affairs, at the New School University, in New York. His latest book is “Capitalism’s Crisis Deepens”. Richard, good to have you with us.
RICHARD WOLFF: Thank you.
SHARMINI PERIES: Richard, let’s get your response to these latest figures, and how we should understand Obama’s legacy, or record of 75 months of straight job growth in the United States?
RICHARD WOLFF: Well, I think the way to understand it is to draw a parallel. If you go to a doctor and you want to have an assessment of your health, how you are doing, and how your body is behaving. If the doctor gave you one measure, one test, for example, your blood pressure or, for example, some test of the sugar in your blood, or whatever it was, and said, “Well, that’s it. You’re in great health,” because this one measure makes you look good, you would never see that doctor again.
This is not a serious way to assess your health. There have to be many measures, of the many dimensions, that go into a healthy person’s situation. And the same is true of the economy.
Yes, it is wonderful for Mr. Obama and his defendants, and Mrs. Clinton, in the race, to talk about one of the measures, one of the relatively few measures that things have gotten better over the last 10 to 12 years that they’re trying to talk about. But the reality is the minute you look at a normally diverse set of measures, the story changes, and dramatically. And that’s why it’s very important to refer to the Katz and Krueger papers. Because they are a measure of how good the jobs are, that were gotten — how secure they are, what benefits go with them. And on almost all of those measures, the situation has deteriorated over the last 10 years.
And even, if I have a moment to go a bit further, one of the reasons the unemployment number is down, is not because unemployed people got jobs, but because unemployed people stopped looking for jobs, they were so depressed. And when that happens, the way we calculate unemployment in the United States, the unemployment number goes down, because the number of people without work looking has gone down. But it’s not because they got jobs.
When you put it all together, the reality is, that, for working people in the United States, the last 10 years have been very, very bad. And what’s worse is they come on top of the previous 20 years, when they weren’t very good either — which is why the gap between rich and poor has gotten so much more extreme.
And to put it all in a blunt way, it’s why the predictions that Mr. Obama’s successor, Mrs. Clinton, would win the election, that assumption was destroyed. And, in large part, it was because the reality of what has happened to working people’s situation turned them against the Democratic Party, made them leave the Democratic Party, and particularly the central wing, the Clinton wing. And so we can see in a very dramatic way that these one set of numbers of unemployment simply fail to grasp the reality.
SHARMINI PERIES: And, Richard, these illusions that are created for us with these kinds of job creation numbers, or unemployment numbers, people like you and other good economists at your university, CEPR, Centre for Economic Policy Research, in Washington, they have all been critiquing these kinds of numbers for so long, because it does create the illusion that this problem is being addressed.
Why isn’t it getting through? I know you’re going to say for political reasons, but give us some specifics of how they’re playing with us.
RICHARD WOLFF: Well, it’s because so much of our culture has been invaded by the logic of advertising. You know, it’s one thing to have professors, experts in various ways, can have all kinds of disagreements, but they’re trying to understand a phenomenon. But it’s a very different story when someone enters the conversation, not in order to put forward an explanation among others, but in order to sell something. Advertising enters the discourse with an ulterior motive to market something.
So, for example, Mr. Obama wants a legacy, which I understand. Wants to be thought of as a great success, which I understand. And so he fastens on something that makes him look good — the way the seller of a soda pop will tell you how refreshing it is, but will not tell you about the calories in it, or the damage to obesity numbers in the country, and so on.
So, we are full of a society in which the people with the most money, the big institutions, the big corporations, long ago learned that they can overwhelm scientific analysis — whether it be of cigarettes, whether it be of obesity — it can overwhelm the science, the effort to understand, with the effort to market.
And that makes it very difficult for those who are still trying to understand something, to have a reasoned debate with people they disagree with. Because both sides of the disagreement tend to be overwhelmed by the much better funded approaches that have something to sell, something to prove, and therefore, distort the conversation.
SHARMINI PERIES: Right. So, not only in terms of creation of jobs and dealing with the unemployment rate, Obama also managed, while he was doing all of that, to also make sure that the market and the stock markets did well again, incredibly, in terms of the period he has governed. What was the impact of these gains on working people?
RICHARD WOLFF: Well, I think it can be summarized as the following: Every major index that I look at, and I look at quite a few, indicates that both before Obama, and before the crisis of 2008, and afterwards, the gap between rich and poor has widened in the United States.
What was done to restock and to recapitalize the banks? What was done to flood the economy with money that would find its way into bidding up stock prices? All of those things brought a real recovery to the very people at the top most responsible for the crisis in the first place. So, they got through it, they were helped by the government the most. They were the ones who were most responsible for it. They’ve enjoyed a recovery.
For the mass of the American people, there has been no recovery. They continue to see the gap between themselves and the richest 5% of the population get wider. The jobs they have now are not as good, not as secure as the ones they had before the crisis. They’re wondering about this recovery they hear about, which seems to have passed them by.
Which is why we have Mr. Trump. Which is why we have a society straining, as comparable societies in Europe and elsewhere are also doing. But the end result is to say, “We are in a society whose capitalistic structure is straining the acceptability of this system. The instability, the inequality is simply more than the people of this society can tolerate.” They don’t yet have a clear way out, they don’t have a clear way forward, but their anger, their rage, their dislike for the establishment they hold responsible, is obvious.
From the elections in Italy — they got rid of that government — to the Brexit vote in England, to Mr. Trump’s election here, to the forthcoming elections in France and elsewhere, you can see percolating this sense that there is something fundamentally no longer working in modern capitalism. And that, I think, is shaping more of what’s going on than anything else I can point to.
SHARMINI PERIES: Right. It’s wonderful that some of your analysis, offline we were talking about, Richard, your radio program, and other things you’re doing to educate ordinary workers about these kinds of issues. But overwhelmingly it’s difficult for people to understand, because this is rather abstract.
So when I, over the holidays, every time I met anyone, I asked them about Obama’s legacy and specifically, what they think his obstacles were in terms of making lives better for ordinary people like us. And often they cite that he inherited a great depression, and he had to work through all the economic turmoil that Bush had left behind. And also they make excuses for what he didn’t do. So, let’s try to address that question. What could he have done?
RICHARD WOLFF: Well, I think it’s fair to be fair to him, and it’s fair to say that he certainly did inherit an economic system in severe crisis. The last four months of 2008, here in New York City, where I live and work, were times when the people in the know, working in the Federal Reserve, working in the biggest banks, really wondered whether the system was about to break down and not function. And I mean not function in the practical way. The truck’s not coming into the city with bread and milk for people, all of that because everything was in such terrible shape.
And, yes. Mr. Obama comes into office right in the middle of all of that, and so has a hard row to hoe. I get that. And we’re through it. We’re not as bad now as we were then. But what could he have done?
Well, he could have gotten us to a much, much better place than he chose to do. And let me give you just two concrete examples. He followed what really ought to be called Trickle-Down Economics. He helped the people at the top — whether it was by flooding them with money through a Federal Reserve, or flooding the big companies with wonderful contracts, so that they could do things that were a stimulus to the economy and so on.
Helped all those at the top. Recapitalized the banks. Give the people at the top all the resources, in the hope that it would trickle down to everybody else. And as has always happened when you proceed in that way, the trickling is disappointing.
The folks at the top say, “Thank you, very much,” and keep most of it for themselves. That’s certainly what happened here. He could have chosen an alternative, called Trickle-Up, rather than Trickle-Down. Helped the people at the bottom, the ones who clearly need it most — working people, unemployed people, poor people. Give them the way to spend more money, to have a better life, and that will create the demand for jobs and the profits for the companies who make the things that the mass of people can be empowered to buy. Rather more like what Franklin Roosevelt did, the last time capitalism collapsed, in the 1930s. Obama could have tried to go in that direction. Well, he didn’t.
Second point. Sometimes when you say that to the Obama folks, they come back with, what you called an “excuse” and I think you’re right. “Well, I couldn’t do it because the Republicans wouldn’t let me.” “I didn’t have the support from below that would have been sufficient to overcome the obstacles placed in my way by the Republicans who undermined everything I tried to do.”
Yes, he has a point, there’s a grain of truth there. But let’s be really honest here. A president who wanted to overcome the opposition of the Republican Party, and to build a support from below to do that, would have had to go out into this country and be the leader folks had hoped he might be when they elected him in 2008.
He would have had to respond to all the initiatives from below that showed a population angry and determined to change things. Had he chosen to be their leader, then there would have been a groundswell from below. That might have had a chance to break through the obstacles of the Republican Party. And in 2011 he was given that opportunity. It’s called Occupy Wall Street.
In 350 cities across America — Real News Network covered it too — there were movements that showed masses of people who wanted fundamental change, and would have been the mass base for a change and a confrontation with the Republicans. But Mr. Obama chose not to respond to that. In fact, he coordinated the destruction by bulldozers, in many, many of the major cities of America, of the encampments that came to symbolize Occupy Wall Street.
That is, not only did he not welcome the support from below that he said was missing, but when it actually appeared, he helped to destroy it. He can’t then come back and say to us, “I didn’t have the support from below that might have made it possible for me to go in another direction.” He, unfortunately, missed the opportunity created by his own election, and by the momentum of that moment, he missed the opportunity to become the kind of leader in this economic collapse of capitalism that Roosevelt was back in the 1930s.
And that’s not to argue that everything Roosevelt did was wonderful and complete, it wasn’t. But compared to what Mr. Obama tried, Mr. Roosevelt went much further. And Mr. Roosevelt proved that if you tax corporations and the rich, which he did, to help the mass of people with social security, unemployment compensation and a public jobs program, which Mr. Roosevelt did, not only do you get out of the Depression with trickle-up, rather than trickle-down, but you become the popular president, the most popular president in American history. Roosevelt was re-elected three times. No president had ever had an experience like that — you don’t fail politically if you do that, you succeed.
So Mr. Obama, who wants a legacy, now has to face the daunting reality that he didn’t take the steps early in his campaign, in the face of this crisis, didn’t learn from his predecessor as a Democratic president, and now suffers from a weak legacy. But part of the fault therein, lies with him.
SHARMINI PERIES: All right, Richard. We have many more topics to talk about. I want to get into the Dodd-Frank Act and its success or failure, in our next segment. Let’s continue our discussion in part two, many more topics to take up.
RICHARD WOLFF: My pleasure. I’ll be glad to.
SHARMINI PERIES: Thank you for joining us on The Real News Network.