by Don Peck
THE 1970S
The troubles and turbulence of the 1970s stemmed from many sources. Amidst presidential scandal and military retreat, the United States seemed to have lost its confidence, its moral compass, and much of its luster. But “more than Watergate and Vietnam,” wrote the historian Edward Berkowitz in Something Happened: A Political and Cultural Overview of the Seventies, “the economy was the factor that gave the seventies its distinctive character.”
The seventies saw two major recessions, one beginning in 1973 and the other in 1978. Each involved a sudden spike in the price of oil. Incomes, after rising strongly for decades, were flat, factoring out inflation—even for married couples, and even though married women were entering the workforce in record numbers. Inflation averaged nearly 9 percent a year for the decade as a whole. A third recession, induced by the Fed to arrest inflation as the 1980s began, brought the unemployment rate into the double digits. The economy had mostly recovered by 1983, but prosperity remained elusive for many until the mid-1990s.
The economic challenges that America faced in the 1970s bear some faint resemblance to those the country faces today. Exports failed to keep pace with rising imports (1971 was the first year in the twentieth century in which the United States ran a trade deficit), and American industrial workers felt the sting of international competition. But for the most part, both the origins of the period’s economic weakness (oil and agricultural shocks, slowing growth in productivity) and the particular manifestations of weakness (“stagflation”) were different from those of today.
Nonetheless, the 1970s are the only other modern period in which the United States experienced long stagnation, punctuated by punishing setbacks. They are instructive primarily for the long-lasting social and political changes that stagnation eventually produced.
In Something Happened, Berkowitz describes the burst of civil-rights legislation in the 1960s, following John F. Kennedy’s death. But, he notes, that “hopeful legacy began to sour after 1972,” as the economy began to sink. The ’60s were hardly innocent of white anger over civil rights, but in the ’70s, white grievances intensified and spread throughout the country. Conflict grew over busing to achieve racial balance in schools, and protests in Boston turned violent. (One iconic newspaper photo showed young white men trying to impale a black man with an American flag.)
Legal challenges to civil-rights policies began to meet with success. In 1978, the Supreme Court ruled in Regents of the University of California v. Bakke that race-based affirmative action was, in some cases, illegal. At the beginning of the ’70s, writes the historian Bruce J. Schulman in The Seventies: The Great Shift in American Culture, Society, and Politics, most blacks said they wanted to live in integrated neighborhoods and send their children to integrated schools. By the decade’s end, more than two-thirds said they felt more kinship with black Africans than with white Americans.
In previous decades, writes Schulman, “American politics and culture had acted like a universal solvent: dissolving ethnic and regional loyalties, diluting sectarian strife and religious enthusiasm.” But in the ’70s, he says, these same forces acted as a centrifuge, spinning people and communities further apart. Rising individualism, the decline of the WASP social order, and a sexual revolution—themselves inseparable, it might be argued, from the economic transition away from industry and corporate hierarchy and toward a flatter, more creative information age—sowed confusion and concern. Years of economic stagnation, meanwhile, leached away respect for political leaders.
Throughout the ’70s, anti-immigrant groups grew stronger. In his 1978 novel, The Turner Diaries, William Pierce imagined violent revolution and the extermination of nonwhites. The novel drew a large following across the next decade, as white-supremacist movements and antigovernment militias proliferated. The extremism that hard times nourished in society’s darker corners left a long legacy. In 1995, as the economy was beginning a remarkable period of growth, Timothy McVeigh bombed a federal office building in Oklahoma, killing 168 people. But the antecedents of McVeigh’s ideology can be traced clearly to the anomie and paranoia of the 1970s.
Reactionary violence was by no means limited to whites. In 1992, black residents of South-Central Los Angeles burned, looted, or otherwise damaged some 800 Korean-owned businesses during the riots that broke out after a jury acquitted four white police officers of beating a black motorist. These riots, too, had roots in the ’70s, when manufacturing jobs disappeared from inner cities, chronic unemployment rose, neighborhoods began a steep decline that became self-reinforcing, and racial tensions of all sorts grew stronger.
THE 1970S SAW the beginnings of a major shift in economic power, one that irrevocably altered family dynamics, and one that is becoming more pronounced today. Women entered the workforce in great numbers, pushed by economic necessity and pulled by a rising service sector in which physical strength mattered little. In 1970, 43 percent of women in their prime working years held jobs; by 1980, 51 percent did. (Among married women with young children, the increase was sharper still.) In between came the women’s-rights revolution—arguably the only major advance of individual rights in that decade. New laws and court decisions put women on more-equal footing in universities and in the workplace, and gave them more-equal access to lending. Many previously all-male colleges went coed.
This revolution, Schulman argued, “was not the product of a conscious feminist ideology so much as it was the result of impersonal economic forces,” and it largely accompanied—rather than preceded—the more central role women were finding in family fortunes. As women found the economic means to leave unhappy marriages, divorce rates skyrocketed. Journalists began to write of a crisis of masculinity in blue-collar communities.
The young adults of the 1970s, idle in numbers not seen for a long time, were poorly regarded. (Among sixteen- to twenty-four-year-olds, unemployment for a time surpassed 15 percent, far higher than it had ever been in the 1960s.) Cultural critiques described a “wasted” generation, rootless and uncertain. Still, unemployment never neared 10 percent in the ’70s (though it did spike briefly into double digits in the early 1980s, when the Fed raised interest rates to kill inflation). Inflation was the real scourge of the time, eroding people’s wages and nest eggs. And it was inflation—not joblessness—that left its deepest mark on the decade’s youth.
In America in Search of Itself, the historian Theodore White wrote that conversation in the 1970s was
stained and drenched in money talk, by what it cost to live or what it cost to enjoy life. In the upper classes, one heard cocktail chatter about the cost of a new suit or dress.… But the conversation among poor people, among ordinary people, was far more significant. They winced and ached. Some mysterious power was hollowing their hopes and dreams, their plans for a house or their children’s college education.… Faith in one’s own planning was dissolving—all across the nation. The bedrock was heaving.
Families’ savings, carefully built over many years and mostly kept in low-interest bank accounts, were destroyed by the inflation of the 1970s, and with them the ideal of thrift that had prevailed since the Depression. At the same time, houses, or at least those secured by fixed-rate mortgages, came to look like great investments; as inflation rose, so too did their prices, for the most part. What’s more, fixed-rate mortgage debt became cheap as inflation rose. As Joseph Nocera wrote in A Piece of the Action: How the Middle Class Joined the Money Class, “[I]t became nearly impossible to go to a dinner party in a large American city and not wind up spending half the night discussing real estate prices.” Middle-class Americans “no longer bought a house so much as they ‘invested’ in one.”
All of these developments were duly noted by young Boomers, who—it seems in retrospect—drew lifelong lessons from these formative years. Nocera quotes a young Paine Webber economist, Christopher Rupkey, who in 1979 offered advice to his generation in an op-ed published by the New York Times: “ ‘Never buy what you can’t afford’ was the ad
monition of our parents,” he began. “Today, the statement has been changed to, ‘You can’t afford not to buy it.’ … Get your money out of the bank and spend it! Inflation gives the most it has to give to those with the largest pile of debts.” And so from the fruit of one crisis grew the seeds of the next.
One shouldn’t overstate America’s economic transformation during the seventies, but by the decade’s end, the foundations of the economy we have today had been partly laid. Industry emerged gaunt from the period, and bewildered industrial workers questioned their future and identity. Bill Gates emerged from his garage with a new software company, and rode the wave of the information age. Newsweek dubbed 1984 the “Year of the Yuppie,” describing a novel type of young worker whose affinities and loyalties lay not with past custom or nation or employer, but with a social network of similarly educated, like-minded professionals. The term was an insult from the start, and soon disappeared from the vernacular, but yuppies would in fact continue to multiply, forming the center of the new economy. Today we call them the meritocratic elite, and their actions and attitudes have shaped the course of the current crisis.
WHAT SHOULD WE take away from these three periods of long economic distress?
For modern readers, accustomed by life experience to the idea that recessions and market downturns are rare and rapidly self-correcting—mere blips between long stretches of growth—each of these periods serves as a bracing caution. All contained growth spurts, false starts, and green shoots. But these upturns proved brief and unsustainable: in each case, for more than a decade, most Americans saw their prospects grow dimmer.
Policy mistakes (or, in the case of the late nineteenth century, the absence of sufficient policy tools) played a part in deepening or extending all of these downturns. And ultimately, the nation’s political balance shifted during each of them, with one party losing credibility and the other gaining traction for a number of years or even decades thereafter.
It is perhaps significant that the downturns of the 1890s and 1930s, both precipitated by major financial crises, were preceded by rapidly rising income inequality and the concentration of wealth. (Recent academic research suggests that inequality heightens the risk of financial meltdowns, perhaps by inducing the middle class to take on debt in a futile effort to keep up with the Joneses.) Both crises also led, ultimately, to policy reforms that helped reduce inequality in the following decades—decades we remember for their broadly shared prosperity.
History is messy, and one thing evident from a comparison of these three periods is that culture and politics do not respond uniformly to economic shocks. Both the Gilded Age and the 1970s, for instance, saw great spiritual awakenings, as Americans sought order, meaning, and comfort amidst the disruptions of those eras. Yet nothing comparable occurred during the Depression; indeed, by some accounts, religious intensity and adherence slackened.
Yet in all three periods, one can clearly see a slow buildup of social discord, a rise in racial antipathies and anti-immigrant sentiment, the corrosion of trust, and, in general, the mobilization of efforts geared toward trying to recapture some past idyll rather than those that squarely confronted the future.
Perhaps the most-significant transformations were the ones that occurred in private, inside American bedrooms and kitchens or in backyards. Long slumps change marriages, shrink families, and alter the character of neighborhoods. And they shift the path of whole generations. The longer the current slump lasts, the more pronounced these same sorts of shifts and changes will be. But no matter when the slump ends, we’ll be living with the changes for decades to come.
4
GENERATION R: THE CHANGING
FORTUNES OF AMERICA’S YOUTH
I’M DEFINITELY SEEING A LOT OF THE OLDER GENERATION SAYING, ‘Oh, this [recession] is so awful,’ ” Robert Sherman, a 2009 graduate of Syracuse University, told the New York Times in July 2009. “But my generation isn’t getting as depressed and uptight.” Sherman had recently turned down a $50,000-a-year job at a consulting firm, after careful deliberation with his parents, because he hadn’t connected well with his potential bosses. Instead, he was doing odd jobs and trying to get a couple of tech companies off the ground. “The economy will rebound,” he said.
Over the past two generations, particularly among many college grads, the twenties have become a sort of netherworld between adolescence and adulthood. Job-switching is common, and with it, periods of voluntary, transitional unemployment. And as marriage and parenthood have receded farther into the future, the first years after college have become, arguably, more carefree. Early in this recession, the term funemployment gained some currency among single twentysomethings, prompting a small raft of youth-culture stories in the Los Angeles Times and San Francisco Weekly, on Gawker, and in other venues.
Most of the people interviewed in these stories seem merely to be trying to stay positive and make the best of a bad situation. They note that it’s a good time to reevaluate career choices; that since joblessness is now so common among their peers, it has lost much of its stigma; and that since they don’t have mortgages or kids, they have flexibility, and in this respect, they are lucky. All of this sounds sensible enough—it is intuitive to think that youth will be spared the worst of the recession’s scars.
But in fact a whole generation of young adults is likely to see its life chances permanently diminished by this recession. Lisa Kahn, an economist at Yale, has studied the impact of recessions on the lifetime earnings of young workers. In one recent study, she followed the career paths of white men who graduated from college between 1979 and 1989. She found that, all else equal, for every one-percentage-point increase in the national unemployment rate, the starting income of new graduates fell by as much as 7 percent; the unluckiest graduates of the decade, who emerged into the teeth of the 1981–82 recession, made roughly 25 percent less in their first year than graduates who stepped into boom times.
What’s truly remarkable is the persistence of the earnings gap. Five, ten, fifteen years after graduation, after untold promotions and career changes spanning booms and busts, the unlucky graduates never closed the gap. Seventeen years after graduation, those who had entered the workforce during inhospitable times were still earning 10 percent less on average than those who had emerged into a more bountiful climate. When you add up all the earnings losses over the years, Kahn says, it’s as if the lucky graduates had been given a gift of about $100,000, adjusted for inflation, immediately upon graduation—or, alternatively, as if the unlucky ones had been saddled with a debt of the same size.
When Kahn looked more closely at the unlucky graduates at mid-career, she found some surprising characteristics. They were significantly less likely to work in professional occupations or other prestigious spheres. And they clung more tightly to their jobs: average job tenure was unusually long. People who entered the workforce during the recession “didn’t switch jobs as much, and particularly for young workers, that’s how you increase wages,” Kahn told me. This behavior may have resulted from a lingering risk aversion, born of a tough start. But a lack of opportunities may have played a larger role, she said: when you’re forced to start work in a particularly low-level job or unsexy career, it’s easy for other employers to dismiss you as having low potential. Moving up, or moving on to something different and better, becomes more difficult.
“Graduates’ first jobs have an inordinate impact on their career path and [lifetime earnings],” wrote Austan Goolsbee, now a member of President Obama’s Council of Economic Advisers, in 2006. “People essentially cannot close the wage gap by working their way up the company hierarchy. While they may work their way up, the people who started above them do, too. They don’t catch up.” Recent research suggests that as much as two-thirds of real lifetime wage growth typically occurs in the first ten years of a career. After that, as people start families and their career paths lengthen and solidify, jumping the tracks becomes harder.
This job environment is
not one in which fast-track jobs are plentiful, to say the least. According to the National Association of Colleges and Employers, job offers to graduating seniors declined 21 percent in 2009. They rebounded by 5 percent in 2010 and are expected to rise again in 2011, but not by nearly as much as they’ve fallen. In the San Francisco Bay Area, an organization called JobNob has been holding networking happy hours since the recession began to try to match college graduates with start-up companies looking primarily for unpaid labor. Julie Greenberg, a cofounder of JobNob, says that at the first event she expected perhaps 30 people, but 300 showed up. New graduates didn’t have much of a chance; most of the people there had several years of work experience—quite a lot were thirtysomethings—and some had more than one degree. JobNob has since held events for alumni of Stanford, Berkeley, and Harvard; all have been well attended (at the Harvard event, Greenberg tried to restrict attendance to seventy-five people, but about a hundred managed to get in), and all have been dominated by people with significant work experience.
When experienced workers holding prestigious degrees are taking unpaid internships, not much is left for newly minted B.A.s. Yet if those same B.A.s don’t find purchase in the job market, they’ll soon have to compete with a fresh class of graduates—ones without white space on their résumé to explain. This is a tough squeeze to escape, and it only gets tighter over time.
Strong evidence suggests that people who don’t find solid roots in the job market within a year or two have a particularly hard time righting themselves. In part, that’s because many of them become different—and damaged—people. Krysia Mossakowski, a sociologist at the University of Miami, has found that in young adults, long bouts of unemployment provoke long-lasting changes in behavior and mental health. “Some people say, ‘Oh, well, they’re young, they’re in and out of the workforce, so unemployment shouldn’t matter much psychologically,’ ” Mossakowski told me. “But that isn’t true.”