The standard explanation for this is well-known. We expected better. The recession was (after all) the worst slump since the Great Depression of the 1930s. Millions of Americans lost their homes. Long-term unemployment exceeding six months reached post-World War II highs. Financial institutions once thought impregnable (Lehman Brothers, Merrill Lynch) collapsed or were saved by shotgun mergers. These surprising events weren’t supposed to happen. People were scared, and they remember.
Up to a point, I believe this story. Indeed, I’ve peddled it repeatedly in print. But on reflection, I don’t think it fully captures what happened. Something beyond dashed expectations has amplified fears and anxieties.
The Great Recession seemed to create random victims, so that even those who had jobs, didn’t lose their homes and saw their retirement accounts recover — that is, most Americans — felt threatened. Perhaps the very rich were spared (because their daily lives were barely affected) along with the very poor (because their lives were already chaotic). But from the lower- to the upper-middle class, the lessons seemed dire. If it happened once, it could happen again. It didn’t happen to me last time; it could the next.
For most Americans, prosperity means more than getting richer. Sure, people want higher incomes and living standards. But they also want a sense of control over their lives. Most Americans would, I suspect, sacrifice some income in exchange for a more secure income. They want stability, and for years, most Americans unconsciously took bedrock economic stability for granted, though most would deny this. Jobs could be had most of the time, because recessions were infrequent.
This confidence is gone and, with it, the sense of control. Americans no longer presume bedrock stability. Two developments explain why.
First is the changed behavior of big companies. Since the early 1980s, they’ve increasingly retreated from career jobs, as political scientist Eva Bertram notes in a report for Third Way, a think tank. Companies fired workers more readily. In 1983, the median job tenure — the time with one employer — of men 55 to 64 was 15 years; by 2010, it was 10 years.
Second is a loss of faith in the government’s economic management. For years, public policies seemed to neutralize eroding private job security by minimizing recessions. The Great Recession demolished this comforting notion.
Our Martian visitors would discover that America’s mass abundance is mixed with mass anxiety. There’s a broadly shared sense of vulnerability, which helps explain why discontent is not confined to the distressed. It also accounts for the view that the Great Recession and its aftershocks, unlike previous post-World War II slumps, constitute “an assault on the middle class.” Perhaps continued recovery and more jobs will erase present doubts, though I suspect that any reversal will, at best, be partial because the recession’s psychological effects are pervasive.
Americans are defining prosperity down, to paraphrase the late Daniel Patrick Moynihan. They are aligning attitudes with experience. The consequences are profound for our economy and politics. Judging themselves more exposed to business cycles, Americans have become more hesitant and precautionary in their spending. These worries and the resulting restraint are both a cause and consequence of the weak recovery.
Politics increasingly involves scapegoating — who “lost” prosperity? — and a search for greater public protections against rising private insecurities. Obamacare is perhaps an unintended prototype of this quest, illustrating how difficult it can be. The experience in Europe, with more public protections and a darker economic outlook, teaches a similar lesson. The prosperity paradox is this: America has plenty of it, but not enough to sooth social conflict and allay economic anxiety.
Read more from Robert Samuelson’s archive.