Tag Archives: economic crisis

Disagreement about unemployment figures between government and Gallup

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Gallup suggests that the unemployment figures to be released by the federal government at the end of this week are underestimates. While the government figures are expected to be around 9.6-9.8%, Gallup says the unemployment is really closer to 10.1%.

The main issue seems to be that Gallup is measuring through the end of September while the government figures are based on data that ended in mid-September. And Gallup found that unemployment increased quite a bit in the last few weeks of September.

Symbolic punishment? Fraudulent French trader ordered to pay $6.7 billion

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The economic crisis has raised interesting questions about who is responsible. In the United States, much blame has been placed on the large financial institutions, investment firms and banks, who played a role (though others have also argued that the government and consumers share the blame).

But in the courts, blame could be assigned to any of these parties. In a recent decision in France, a trader who worked for France’s second largest bank was ordered to pay the bank $6.7 billion in damages for fradulent activity linked to the economic crisis. Here is a quick summary of the case’s outcome:

The court rejected defense arguments that the 33-year-old trader was a scapegoat for a financial system gone haywire with greed and the pursuit of profit at any cost — a decision sure to take some pressure off the beleaguered banking system overall.

By ordering a tough sentence for a lone trader, the ruling marked a startling departure from the general atmosphere of hostility and suspicion about big banks in an era of financial turmoil. It was a huge victory for Kerviel’s former employer Societe Generale SA, France’s second-biggest bank, which long had a reputation for cutting-edge financial engineering and has put in place tougher risk controls since the scandal broke in 2008.

Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money — a claim the bank strongly denied.

The story goes on to say that both sides, the trader and the bank, admitted to mistakes along the way. But the court ruling suggests that the trader was the culpable party.

The assignment of blame after large traumatic events is a fascinating phenomenon to observe. Who is eventually seen as the responsible party can depend on a number of factors including national culture, time in history, court cases, public opinion, and other particularities. Whoever becomes the scapegoat can often become the symbol of the traumatic incident, forever linking that person or party to phenomenon that are often quite complex.

The new American normal: pursuing an enriched social life rather than spending

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Sociologist Amitai Etzoni argues that Americans have reached a point where from this point on they may choose to enhance their social lives rather than consume:

The Great Recession provides a golden opportunity to test Maslow’s prescription. As most everybody has read by now, we lived beyond our means for decades, and we borrowed about all we could from overseas and indebted our children. It’s payback time.

There is no way on earth Americans over the next decade will continue to experience the kind of increases in income, and hence standards of living, we have seen since World War II. The question is if they will respond in anger — or benefit, by dedicating themselves, once their basic needs are sated, to spending more time with each other, their children, in social activities and cultural pursuits.

Polls suggest that large numbers are ready.

As Etzioni notes at the end of this piece, the real test of these opinions will come once the economy recovers. If people have more income and disposable income, will they return to their consumerist ways?

But perhaps these attitudes will lead to something different: a society that no longer desires or tries to attain explosive growth periods. Perhaps the true non-consumerist society will be content with slow but consistent growth.

Rebounding from the economic crisis in Dubai

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The economic crisis didn’t just affect American building or construction. The city that has grown out of the desert, Dubai, was also strongly affected and now is making a slow recovery:

Chastened after an extravagance-fueled debt crisis last year at Dubai World, the state-run investment giant, Dubai is getting back to basics.

Glamorous whimsies like a giant artificial island shaped like a palm tree are giving way to more pragmatic priorities meant to revive Dubai’s status as the dominant trading hub between the industrially advanced West and the oil-rich Middle East.

The article goes on to mention a number of factors that need to accompany building and development for it to last long-term including stable governance and a diversified economy.

One factor that is cited as aiding Dubai’s recovery is its established infrastructure.

Slower growth on the edges of suburbia

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While many cities struggle with finding money, some suburbs are still growing. On the suburban fringe of Chicago, about 42 miles southwest of the city, Oswego is still experiencing growth though the pace has slowed:

This year, the local school district reported 648 more students for a total enrollment of 16,828, the village expects to issue up to 100 new-home permits and the village’s population is expected to top 30,000.

And sales tax revenue rose 8 percent — to $4.8 million — for the fiscal year ending in April. The village’s top revenue source also appears stable so far in the new budget year…

In 20 years, Oswego exploded from a village of 3,876 to nearly 30,000 and to an even larger market area that includes unincorporated areas in Kendall County, the village of Montgomery and portions of Aurora.

With the slow-up should come increased business for existing firms. But for the foreseeable future, major retail developments that once arrived in tandem with new residents aren’t likely.

So this is what the recession looks like in Oswego: no decline, some difficult in filling in existing retail and industrial space, but still growing tax revenues, some new home construction, and school enrollments.

I’d be curious to see a larger analysis of how suburbs, particularly those that were growing in the last decade, have fared in the economic crisis. Even with the money woes, I can’t imagine many have declined in population or though perhaps business has declined. My guess is that suburbs that were growth areas five years are in a holding pattern or are experiencing slight growth like Oswego.

“Is the American Dream dead?”

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President Obama was at a town hall meeting earlier this week where he fielded questions about some difficult topics. One question came from a law school graduate who is struggling at age 30: “Is the American dream dead?”

This is an interesting question. One response to this guy, which I don’t think would really placate him or be charitable, would be to say that one personal case of difficulties does not mean the American Dream has disappeared. On the other hand, this question could lead to the question of whether the American Dream will be redefined in the future because of present economic and social realities.

One part of the American Dream that could complicate the future definition is that Americans tend to want better things for their children. It is fascinating to go back to community studies like Middletown and see in the 1920s how parents wanted their wanted their children to get ahead, primarily through education. What if this is no longer feasible for many? Perhaps the American Dream will simply level off for a while rather than continue to expand. But this would mean parents (and children) would need to change their expectations about what the future might hold.