It's not a word but it should be.
Freakoutonomics is a historic journey that parallels the divided public perception over economic reality on the ground both then and now.
Freakoutonomics By CHARLES R. MORRIS Published: June 2, 2006
LAST month saw one of the sharpest drops in consumer confidence since the recessions of 1979-1982. But those were truly dreadful times. Oil prices tripled, rates on home mortgages shot into the mid-teens, the stock market was a disaster area and unemployment rates reached double digits.
Over the past three years, by contrast, American economic performance has been almost glittering. Inflation is still low, while employment and productivity have all been rising strongly. True, stock markets are clearly nervous, and the sharp upsurge in gas prices is adding to consumer skittishness. But the reaction still seems inconsistent with the economy's underlying strengths.
I live in the `economically challenged' Northeast (where those not connected with the financial markets) aren't enjoying this so-called recovery as evidenced by the less than a quarter of a single page of help wanted ads in the local paper. The bulk of the ads are for restaurant and landscaping help.
Want a better idea of how strong your local economy? Take a look at your local paper's classified section. After a quick skim of the help wanted section you may want to glance at the items advertised for sale...things like expensive watches and other personal items people are offering in exchange for some quick cash.
Maybe it's just me but I find myself scratching my head over statements like "But the reaction still seems inconsistent with the economy's underlying strengths."
Hmmn, were we to unspin the words `underlying strengths' would it translate to dropping producer costs resulting in higher profit margins? Anyone recognize this street, it's a one way dead end.
There are parallels with another historical period, however, that suggest the deeper currents of uneasiness.
Pan the camera back to Pittsburgh, July 1877. The Pennsylvania Railroad yard, stretching along the city's riverfront, is a raging inferno, set afire by angry mobs of railroad workers. A contingent of state militiamen, trapped in a burning railroad roundhouse, fight their way through the flames with a Gatling gun.
Over the next few weeks riots rage throughout the country. In Chicago, newspaper headlines declare that "howling mobs" control the city. In New York, The Sun demands a "diet of lead" for rioters. Unrest in San Francisco explodes into a vicious anti-Chinese pogrom. The same period marks the glory years of the rural Granger movement and the Roman-candle growth of the Knights of Labor. American Populism puts down permanent roots.
Historians long attributed the turmoil to a "great depression of the 1870's." But recent detailed reconstructions of 19th-century data by economic historians show that there was no 1870's depression: aside from a short recession in 1873, in fact, the decade saw possibly the fastest sustained growth in American history.
Employment grew strongly, faster than the rate of immigration; consumption of food and other goods rose across the board. On a per capita basis, almost all output measures were up spectacularly. By the end of the decade, people were better housed, better clothed and lived on bigger farms. Department stores were popping up even in medium-sized cities. America was transforming into the world's first mass consumer society.
Time to freak out! I have bolded the culprit, which is nothing less than the ever popular `per capita basis'. Once again pundits create a rosy picture by dividing the wealth concentrated at the top of society among all of the participants...which would be nice if they actually did such a thing.
Look at all of the `wonderful' economic indicators that had people rioting in the streets and burning places of business down. This is what you get when you hold out the example of a tiny segment of the population that is doing well while ignoring the suffering masses... Then there is the disturbing press coverage, `diet of lead' indeed!
But why did people feel so miserable? Partly they were confused by prices, which were dropping sharply. Farmers thought falling grain prices meant they were getting poorer, without noticing that the price of everything else was falling too. Farmers' terms of trade -- the price differences between what they sold and what they bought -- actually racked up solid gains in the 1870's. [snip]
Before the Civil War, America was perhaps the most egalitarian society in the world. But the unbridled entrepreneurialism of the 1870's gave rise to the robber barons. Even if ordinary people were doing better in the 1870's, the yawning gap between the very rich and everybody else fanned resentments. Interestingly, wealth inequality in today's America is roughly the same as in the Gilded Age. [snip]
If one counts only the size of houses and cars, and the numbers of electronic gadgets stuffed into rec rooms, Americans are probably better off than ever before. But as the 1870's suggest, economic well-being doesn't come just from piling up toys. An economy has psychological or, if you will, spiritual, dimensions. A conviction of fairness, a feeling of not being totally on one's own, a sense of reasonable stability and predictability are all essential components of good economic performance. When they were missing in the 1870's, in the midst of a boom, the populace was brought to the brink of revolt.
Charles R. Morris is the author, most recently, of "The Tycoons."
Here Mr. Morris points at one segment of society and uses it to color the rest. For every new Benz or Beemer there are three clunkers with six plus digits on the odometer. That said, there tens of millions of households that don't have `rec rooms' loaded with toys...or cupboards stocked with food...or new wardrobes for every season...or adequate clothing period.
What about the thirty percent of the population that doesn't own a home. Some of those people live in subsidized housing you wouldn't let your dog live in, which brings us to the growing homeless situation...
Herein lies the fallacy of claiming everything is wonderful without qualifying it with the words `from where I'm sitting'. When it comes to measuring prosperity one must be able to point at progress being made at the top AND the bottom.
Naturally, the problem here (according to this author) is not reality but `perception'. If people would only look at the `per capita' figures and realize how well they were doing (on paper) they'd see that all of this pessimism is `unfounded'.
Like a volcano, the `boom' only happens at the top. The bottom gets the rocks, ashes and lava that scorch the earth.
Thanks for letting me inside your head,
Gegner
