The Potemkin Economy
September 10, 2018A “Potemkin village” is an impressive façade or display built solely to deceive people into thinking a situation is better than it really is. We owe the term to Grigory Potemkin, the Russian governor of Crimea in 1787, who supposedly constructed fake villages along the route the Empress Catherine II was to travel, to convince her that he was doing a splendid job administering the region, and that the peasants were prosperous and happy. Think of it as the precursor to the back lot at MGM or Warner Brothers.
Whether true or not, it’s too good a story to dismiss, illustrating as it does the fundamental human need for good news, especially when it can be used to gloss over bad news.
I am reminded of a Potemkin village almost every day when yet another tweet from our President touts “the greatest economy ever.” Today’s version trumpets “The GDP Rate (4.2%) is higher than the Unemployment Rate (3.9%) for the first time in over 100 years!” Other than depending on an outlier GDP number (the previous quarter was 2.2%), the statement is patently false. In April 2000 the unemployment rate was 3.8% while GDP was at 5.3%, and in 1968, the unemployment rate was 3.5% while GDP was 5.5%. Moreover, in both instances, these sterling numbers were immediately followed by a recession.
Nonetheless, even the usually reliable, failing, (and paragon of fake news) New York Times routinely refers to the economy as “roaring” and “booming.” The basis of all these claims is last quarter’s GDP growth, rising corporate profits (driven by tax cuts and tax cut-funded stock buybacks), an historically low unemployment rate, and the longest-running bull market in modern financial history.
Aside from the 100 million working stiffs classified by the Bureau of Labor Statistics as “production and non-supervisory employees,” whose real wages (adjusted for inflation) have barely budged since 1964, can anyone doubt the strength of the economy?
Perhaps we should ask the American workers recently surveyed by the insurance company MassMutual. More than half of them don’t believe they will ever achieve what they define as the American dream, financial security for themselves and their family. That could be because nearly one in ten have no emergency savings and only one in four could cover more than six months of expenses.
Or we could go under the hood of the glowing statistics promulgated by various government agencies, such as the $175,000 worth of bank and retirement savings reported for the average American household in June, 2018. Or the $275,000 in savings for the average Baby Boomer heading into retirement. The median American household (50% higher, 50% lower) only holds a paltry $11,700 in the same types of accounts. And the median boomer has less than $25,000 saved up.
Or we could ask the 78 million Americans, over 30% or all adults, who feel the need to participate in the side hustles that the Federal Reserve calls the “gig economy,” work done outside of regular employment structures. Things like selling goods on eBay or flea markets, renting out space on Airbnb, or doing personal services such as dog walking or baby sitting. Is that their version of the American dream?
Or we could consult with the average debt serf (a.k.a. average American worker) whose outstanding obligations are currently five times his or her monthly salary. That’s about $140,000 per household according to the Fed. Compare that to 1980, when the average amount of debt per worker was less than two times their monthly salary.
Or we could pay a visit to our local zombie shopping mall. The number of retail store closings in 2017 tripled the number in 2016, and 2018 is on a pace to surpass that record.
Or we could go on and on with inequality of wealth, robots replacing people, soaring student loan debt, increased poverty rates, declining home ownership, a miserly minimum wage, and knock-on effects like shortened life spans, the growing suicide rate, and the opioid epidemic.
The simple truth of the matter is that no amount of Potemkin statistics or Presidential lies can hide the truth that the economy is failing the peasants, who are neither prosperous nor happy. And it is those same peasants who put Trump over the top in the last election. Is there any conceivable way that this can end well?
My apologies for this blog going dark for most of the summer. But now that The Eleventh Grieve is being shopped by my newly-retained agent, and I have zeroed in on the subject, if not the characters and plot, of Opus #4, I will try to be a more regular correspondent.