A Tale of Two Recoveries

It is the best of times; it is the worst of times. Tuesday provided further evidence of the schizoid nature of the economy these days. First came the hotly anticipated report on Goldman Sachs’ second quarter profit, so massive ($3.44 billion) that it even outstripped the projections we’ve been hearing from the fluttery nabobs on Wall Street since last week, which in retrospect turned out to be only moderately obscene. If that number—or the news that Goldman, just recently weaned from the public tit, is planning to use its earnings bonanza to pay out lavish bonuses last seen in the gaudy pre-crash days—hurts your soul, and if you haven’t already read Matt Taibbi’s important, much discussed Goldman hit-piece in Rolling Stone, then now is the time. Chicken soup, and all that.

Whether or not Goldman is the true éminence grise of modern capitalism—or more precisely, the “great vampire squid wrapped around the face of humanity,” as Taibbi would have it—there is no doubt that the financial giant is doing remarkably well these days. For that matter, so are JP Morgan Chase and Wells Fargo. Not as well, of course, but still nothing to sneeze at given that six or nine months ago it seemed the end was in sight for the lot of them.

And why not? After all, this has been the main thrust of the Bush/Obama recovery plan all along: save the major banks from imminent collapse, re-inflate sagging capital markets, make a nod towards increased regulation, and party like it’s 2006. It can’t be long now before Tim Geithner dons a flak suit, ascends to the balcony overlooking the New York Stock Exchange, and declares that mission accomplished.

Meanwhile, back in the real world, beyond the canyons of glass and marble in Lower Manhattan, the bubble is still bust. Nowhere is that more true than in Michigan, which was suffering through a recession a full three years before the rest of the country and where a statewide unemployment rate of more than 14 percent now leads the nation. Barack Obama, on his way to throw a low, offspeed first pitch at the Major League Baseball All-Star game in St. Louis, stopped yesterday in the struggling auto city of Warren, where he gave a speech on the economy and announced a new proposal to substantially increase funding for community colleges around the country.

“The hard truth is that some of the jobs that have been lost in the auto industry and elsewhere won’t be coming back,” Obama told the crowd at Macomb Community College. “They are casualties of a changing economy. And that only underscores the importance of generating new businesses and industries to replace the ones we’ve lost, and of preparing our workers to fill the jobs they create.” To that end, his $12 billion American Graduation Initiative is to fund postsecondary education and skill training for millions of American workers, which will “help us thrive and compete in a global economy.”

But as a sobering editorial in the Detroit Free Press noted on the eve of Obama’s visit, “Michigan has emphasized job retraining for months, if not years now—and yet people keep losing their jobs, even in supposedly hot fields such as health care.” An informal survey conducted by the New York Times, of thirty-six graduates from a retraining program at the very same Macomb Community College where Obama spoke, found that “at least 60 percent appeared either not to be working or to be in jobs unrelated to their training.”(6)

Nor is Michigan alone on this count. A Department of Labor study issued late last year found the benefits of the major federal retraining program to be “small or nonexistent” for dislocated workers, who can expect “at best, very modest” gains in earnings from participating in the program, “even three to four years after entry.”

“The real problem in Michigan,” the Free Press rightly concluded, is not inadequate funding for job training programs, but, simply, the jobs themselves, which are disappearing fast as the auto industry contracts in the wake of the structured bankruptcies at General Motors and Chrysler. And that’s one reason why the Obama administration’s handling of the crisis in the industry (which I wrote about recently for The Nation) was so disappointing. Instead of seizing the moment to put forward an ambitious new industrial policy agenda for reinvigorating (and greening) the American manufacturing economy, the administration decided on a plan that made sense only in corporate boardrooms far removed from the shuttered factories and worthless retraining programs of Warren, Michigan. 

More money now for education and skill training is hardly a bad thing, but without a plan to create the well-paid jobs of the future to go with it—well, as the Free Press put it, Obama “can’t afford to sugar-coat anything in front of a Michigan audience.”

Still, it was unfortunate to learn that the administration’s auto task force, assembled to plan and carry out the restructurings at GM and Chrysler, looks like it will be dismantled by the fall. Rather than pulling out of the auto industry as soon as possible, the Obama administration would be wise to reconsider its role in steering the domestic manufacturing economy towards recovery. Some smart, well-organized, and progressive thinking autoworkers have a much better plan for how to approach the crisis in the industry, by tying it to the broader environmental crisis and coming up with a “bold proposal that can put people back to work and address global climate change.”

That’s the kind of recovery everyone can appreciate.

A copy of a letter the autoworkers sent to President Obama yesterday can be read here.