As a result of the housing slump, says Reuters, more than a million people will lose jobs in or related to the construction industry.
Of course, they don’t have to worry. There are many ‘safety nets’ to cushion their fall. Governments used to talk of providing ‘safety nets’ for citizens in trouble. That meant offering assistance to people on the margins of society. A man who lost his job would get unemployment compensation. One who was injured would get workman’s comp. Poor people were offered food stamps…and surplus food from government farm support programs.
Now, the feds offer a safety net for people with money – a kind of rich man’s Marxism – in the form of protection against financial losses.
On August 17th, US stocks were selling at just 8.25% below their all-time high. Yet, the rich were already bellowing for a bailout. And along came the Fed with a cut in the discount rate. According to Fortune Magazine, the Fed also bent its rules to help two major banks – Citigroup (NYSE:C) and Bank of America (NYSE:BAC).
So great was investors’ confidence in these rescue efforts that it was soon back to business as usual on Wall Street. Stocks seemed to be on the road to recovery last week – with another solid increase on Friday. The yield on the 30-year Treasury bond is back at 4.89%. Gold has returned to US$677. The dollar is falling again. We can now announce with confidence that ‘all is well’.
The logic of the safety net – whether used to catch a poor man or a rich one – is that whatever mess you’ve gotten yourself into, someone else pays for it. You forget to save money…you lose your job; bingo…someone else provides emergency assistance. During the ’70s and ’80s, Americans began to realise that providing unlimited assistance to the poor had its drawbacks; many people actually seemed to prefer a life of easy poverty to a life of hard work. Many were ‘hooked’ on public assistance, with several generations of welfare recipients in a single family. We recall, in the early ’80s, asking a young woman in the ghetto of Baltimore what she did for a living. “I get a cheque,” was her reply.
Poor thing. She never knew the pleasure and pride of a job well done. She never enjoyed the boost to her confidence and self-esteem that minimum wage employment can give.
Later, the Reagan administration reformed the welfare system. We don’t know if it did any good or not; but people stopped getting so many cheques…and stopped talking about it. Now what they are talking about is the safety nets for the rich – and everyone is in favour of them. So far, we’ve seen the central bank act with remarkable speed to help bankers, speculators and hedge fund managers. Stockholders have been given a boost too.
And if the housing slump worsens, government will probably rush out some safety nets for homeowners.
Now, capitalists, proles, and the bourgeoisie all get cheques. Is that progress…or what?
Markets and Money