Down the Up Escalator (2 page)

Duane died suddenly in Arizona, where he’d moved a few years earlier to work in a specialized shop that had something to do with industrial lasers. (He “kept ahead of it” till the end, it seems.) The funeral was scheduled for Saturday, and there was plenty of room for out-of-town guests. “Dad built these beautiful built-in sleeping spaces,” his son told me.

Duane’s children (the kids who’d been shuttled between shifts with such split-second timing) were trying to figure out how to keep the house in the family instead of selling it to a stranger who might not appreciate their father’s craftsmanship. But all of that was still “up in the air.”

I didn’t go to the funeral, but I did at least manage to send a timely note of condolence.

Lehman Brothers collapsed two months later, and I began interviewing people who’d lost jobs, homes, or savings in the Great Recession for this book. It took me two years of talking to recession victims to see how Duane’s pre-crash history, the parts I’d been privy to, explained the crisis that hit the rest of us after he died.

Once I realized that Duane and his family belonged in a history of the Great Recession, I tracked his son down. He told me that his sisters, both living in Michigan, had toyed with the idea of moving to Arizona, maybe together, though one was married and the other wasn’t. They’d even begun to explore the employment situation out
there. (One of Duane’s daughters is a medical receptionist and the other a delivery truck driver.)

Then came the crash, and who would give up a steady job? Unfortunately, while they’d waited, house values dropped to the point that even if they managed to sell Duane’s house at its post-crash price, they’d still owe the bank over $200,000. The house, with all Duane’s beautiful built-ins, was now “underwater.”

Since their mother was by then off the scene and their father had left no other significant inheritance beyond a $15,000 death benefit and a $6,000 credit card debt, his children couldn’t afford to keep paying the mortgage. So, on the advice of a lawyer, they mailed the keys to the bank and walked away.

“Dad would make some joke,” his son said. “ ‘When I was alive, I once stopped you from
running
away from home, but I taught you to
walk
away from a home after I was dead.’ Something like that. Only he’d make it come out funny.”

There is probably some way to make it come out funny, but I can’t work out the wording either.

This is not to say that Duane led a deprived or worthless life. His estate may have fallen victim to the recession, but he himself worked fairly steadily at increasingly skilled and, let’s hope, “worthwhile” jobs. He raised three children who get along with one another and admire their father. And he seems to have retained his self-aware but not self-deprecating humor to the end.

On the other hand: here’s a workingman, part of a two-income family, who kept ahead of off-shoring, kept ahead of automation, worked for four decades, and died with no savings, negative equity in his house, and a $6,000 credit card debt.

Apropos of that credit card, Duane’s son insisted on telling me that his dad derided “consumerism” to the end. While he was growing
up, the family never bought a big-screen TV, a new car, or the season’s must-have sneakers on credit. Most of the $6,000 debt, he thought, was left from Duane’s last move from Illinois to Arizona, a career investment, one might call it, that he’d been paying down.

All of this suggests to me that while his skills went up, Duane’s real wages stayed level or may even have gone down over his lifetime. But down is an un-American direction.

From 1820 to 1970, real hourly wages in America rose every decade—even over the course of the 1930s. That extraordinary century and a half (probably unique in history) ended in the 1970s. From then till now—in other words, throughout the course of Duane’s working life—U.S. hourly wages stagnated or declined.
*

Duane seems to fall into the high end—the stagnant end, that is—of that income statistic. During the years when so much work was moved abroad and so much industrial skill was transferred from human to computer, Duane was one of the foresighted or fortunate Americans who managed to “keep ahead of it.”

Why, then, do I say that his life predicted the Great Recession?

Over the decades during which Duane’s earnings were close to flat and his less skilled or less fortunate colleagues lost ground, U. S. productivity rose immensely. To put that statistically, between 1971 and 2007, U.S. productivity increased by 99 percent; that is, it nearly doubled. Over those same years hourly wages rose by 4 percent. (That’s not 4 percent a year; it’s 4 percent over thirty-six years.) In other words, the average worker’s productivity rose
twenty-five times more than his pay.
†
People like Duane and his computerized white-collar wife produced more and more per hour even as their wages stayed constant or declined.

But the United States is a consumer economy. Duane used that word “consumer” to chide his children’s craving for the in thing. But to economists “consumer economy” is a neutral term to describe a society that sells most of what it produces internally. In the United States we sell 70 percent of the goods and services we make to each other. But if the majority of Americans was earning less and producing more, who was going to buy all the stuff?

When Henry Ford raised assembly line wages to a fabulous $5 a day in 1914, he explained that his company couldn’t grow unless Americans earned enough to buy the cars it made. When the companies Duane worked for began to cut wages, they reasoned that instead of
paying
their workers enough to buy stuff, they could
lend
them the money. Or perhaps they didn’t so much reason as fall into the practice of necessity.

When Duane worked for General Motors in the early 1970s, it was an automaker that had gotten into auto loans to promote
sales of its own products. By the time Duane died, General Motors Acceptance Corporation was not only an auto lender but the fourth-largest home mortgage lender in America. The TARP program bailed it out of massive subprime mortgage losses.

Similarly, that other industrial icon, General Electric, established its lending arm, GE Capital, to help midsized manufacturers finance their purchases of GE generators. But as real wages fell and real sales growth slowed, it too morphed into a financial firm. By 2007, the year before the crash, GE Capital contributed half of GE’s profits.

Corporations that didn’t become banks themselves deposited their profits in outside banks or returned them to shareholders who did the same. Thus Main Street money became Wall Street money. To put it another way, our economy became financialized. But what were financial institutions doing with all the money that was accumulating in fewer and fewer hands?

In my book
Money Makes the World Go Around
, I tried tracing my own bank deposit as it flowed out into the global economy in the mid-1990s. Most of my money, I discovered, coursed round and round through closed circuits for the trading of currencies, securities, and more abstract derivatives. The little that seeped out into what bankers call the “real sector” might be used to buy things like third-world water and power systems (without making any material improvements in them). A lot of the rest was lent to companies, countries, and private citizens who seemed to have no expanding business or rising income with which to pay that money back.

You couldn’t miss the Ponzi-ish smell. If I don’t have $10 this year and my wages aren’t going up, how will I have $15 next year to pay you back with interest? Take out more loans? By the late 1990s
it was obvious to anyone but a central banker that this couldn’t go on much longer.

If it sounds as if I’m flaunting my own economic prescience, let me state for the record that while I shook my head over student loans, leveraged buyouts, dot-com stocks, and credit card debt, I did
not
predict that the ultimate Ponzi scheme of the era would involve selling, securitizing, and betting against home loans made to Americans who couldn’t afford houses.

All I knew was that the United States is a consumer economy. But instead of sharing the productivity growth of the last forty years with our consumers, we divided it so unequally that most of the new wealth went to 1 percent, leaving the other 99 percent, including Duane, too poor to keep buying what they produce. Eventually, it caught up with us.

Yet once I started talking to victims of the Great Recession, I noticed something odd. “Poor” Americans are surprisingly rich. The breadlines of 1929 have been staved off by unemployment insurance. The two-income family, though it may have been a response to declining wages, is another form of unemployment insurance. Most people who are out of work not only eat but stop for take-out coffee. Not a single one of the long-term unemployed you’re about to meet carried a thermos.

I’m aware, of course, that over 15 percent of the U.S. population lives below the official poverty line and that a sizable number face what we now call food insecurity. But I began this study by contacting people who had lost a job, a home, or savings in the Great Recession. That means they had one or more of those “middle-class” accoutrements to begin with.

A couple of people I talked with began to suspect, in the very course of our conversations, that they may “recover” from the
recession by landing in a different socioeconomic class. Some have distressing ways of coping with their insecurity. But you’ll also meet people with a real talent for snatching moments of pleasure and creating reassuring small routines, even when they can’t be sure of larger patterns like where they’ll work the next month or, in a couple of cases, where they’ll sleep the next night.

As I talked with people who’ve lost jobs, homes, and savings, I couldn’t help wondering what shape they and the country will be in after we fully emerge from the downturn. I think there are enough clues in their individual histories for us to make some good guesses by the time we’re finished.

In the meantime, I’ve tried to leave these recession vignettes open-ended enough for you to glimpse a lot that’s contradictory or irrelevant to my economic notions. That may be the best reason to travel along with me and see how specific, unique Americans cope with the Great Recession.

April 2009

Did you ever wonder how Jerry, George, Elaine, and Kramer of
Seinfeld
manage to pay Manhattan rents with those flaky jobs of theirs?

I met a group of four single New Yorkers who had worked at unglamorous office jobs and devoted their incomes—one earned $48,000 a year, one earned $52,000, and I’m guessing that the others earned around the same (they didn’t say)—to maintaining themselves, supporting their church, and experiencing the city.

Even before they lost their jobs, the four friends were constantly in and out of Geraldine’s, or Gerri’s, condominium near Lincoln Center. When Gerri mentioned to the congregation that she was now unemployed, her friend Elaine, who’d already been out of work for two months, said, “We ought to start a Pink Slip Club.”

The idea was to keep each other’s spirits up and to enjoy inexpensive outings around the city. “We might as well make something positive out of having free time during the day—while it lasts,” Elaine had said optimistically.

In the first couple of weeks they’d gone to a museum and to
an afternoon concert, and Elaine had come over to Gerri’s to play Scrabble.

“Let’s do it again,” Gerri said.

“It was fun,” Elaine agreed. “But it felt strange in the middle of the day.”

Our Elaine is tall, blond, and more overtly glamorous than her
Seinfeld
namesake. Like
Seinfeld
’s Elaine, she can be a bit prickly, but that’s only when she senses disapproval or misunderstanding of her intentions. And unlike
Seinfeld
’s Elaine, she’s spontaneously generous. The job she lost involved processing accounts payable for a broadcasting conglomerate.

Gerri is short, dark, and quiet. When she speaks, it’s often to encourage others to express what they mean more fully or to point out the basic agreement that underlies seeming differences. I could tell how good she makes others feel by the way the doorman smiled when I asked for her and how he sang into the intercom, “Gerri, you have company.” For over twenty years Gerri had worked as an insurance adjuster at an office a short walk from her apartment.

Gerri and Elaine are suitable names for the two women, but it would raise constant misleading mental images to call the men George and Kramer. So I’m going to call them Kevin and Feldman from the
Seinfeld
episode where Elaine starts hanging out with three alternate buddies who turn out to be just too nice for her. It won’t throw you far off if you think of the Pink Slip men as agreeable
Seinfeld
avatars.

Kevin is slim, well-groomed, and precise. He frequently restates what the others say with just a small editorial tweak. Perhaps that’s because I’m there and he wants to make sure that the historical record is correct. But it may also be because Kevin was an editor at a trade journal. Despite the tendency to edit his friends, he’s attentive
to them in matters like holding doors, locating things they’ve carelessly set down, collecting information they can use, offering refreshments around, and similar thoughtfulness.