Can pump-priming choke off US unemployment?
A crisis of the motor industry; a crisis of the home industry; a credit crisis; and high petrol prices. Every expressway of the American Great Recession passes through Elkhart Indiana, capital of RV manufacturing (recreational vehicle: basically motorhomes and trailers).
It’s totally devastating for places like Elkhart that we have just visited at the same time as President Obama. And in Elkhart you can see that even as high-level recession indicators ease, the real unemployment crisis is only just beginning.
RVs are the embodiment of living out the American dream of driving the open road in luxury. The problem is that they only do eight miles to the gallon, so few can afford to buy them any more. That means that in the space of months, unemployment here went from 5 per cent to 20 per cent.
A year on, many of the workers that can’t get jobs are now losing their eligibility for unemployment benefit.
We met Corey, who used to manufacture bathrooms for RVs and lost his job last year. He said 300 people applied for a job as a shop assistant at a 7-Eleven in Elkhart. He got some part-time work at a petrol station, but supplements his income by selling the plasma in his blood $50, twice weekly, risking a haematoma.
We met him at a food bank, and he says he is hungry. The minister responsible has seen a 40 per cent increase in usage of the facility. It offers those living at the poverty line and just before 8 items of free food, and a free book (one on Hilary Clinton and the other, called Blood Wars, is about President Bush).
In this small town 350 new families used the food bank in the last month alone. The demand is so high that they are having to buy food wholesale.
The local churches are encouraging people to become more self-sufficient. They provide seeds so that the hungry can turn abandoned housing foreclosures into community gardens where they can grow their own veg to feed themselves.
This is not what you expect in America. The fear would be that many of these jobs are not coming back, that they have been forever lost.
President Obama wants to replace the eight-mile-a-gallon jobs with green jobs, but I’m sceptical about how many of those there are.
The White House is pouring money into grands projets and bridges. And even resurfacing a runway that doesn’t seem to be being used very much (and doesn’t seem very green).
All this is Keynesianism in the shadow of the University of Chicago, where they basically invented rabid free market fundamentalism. It’s very surreal and ironic.
Other than a smooth corporate runway, the fruits of the stimulus package are yet to be seen on the ground. Larry Summers, the White House chief economist, believes that only 10 per cent of the job creation from the stimulus will come this year. The bulk will be delivered next year.
Of course, this has not come for free. Much of the $787bn will be added to the US government debt.
The question is: will these remarkable efforts to pump-prime the economy choke off the rise in unemployment? America in my lifetime has had an unemployment rate of around 5 per cent; Europe around 10 per cent. US unemployment now exceeds that of the Eurozone.
On previous experience you would bet on American ingenuity to invent battery-powered RVs. The spirit that seeks to use foreclosed gardens to plant vegetables to provide food for the unemployed shows this country at its irrepressible best.
Nonetheless, joblessness so high, the fall in conspicuous consumerism, and the cutback in borrowing, and a rise in saving all point to a very different American economy.
Even if the recovery is ‘V-shaped’, the economy certainly won’t be RV-shaped.