Radio commentary, September 23, 2010
Summers • recession over! — except in housing and jobs • Zuckerberg & the charter scam
Summers back to Harvard
So Larry Summers is leaving as head of Obama’s National Economic Council. Everyone who talks about Summers assures us that he’s a very smart fellow, though he left Harvard, where he was president for five years, a financial wreck. (Background here, here, and here.) He’d advised the endowment to borrow heavily to speculate in derivatives that went sour, yielding billions in losses. But, as everyone will tell you, Larry is very smart. He did help design the stimulus package, which, for all its faults—not being big enough and not focusing enough on long-term investments—was a lot better than nothing, since it helped keep us from falling into Great Depression II. It’s about the best thing the Obama administration so far.
It’s likely that Summers is going to be replaced by someone worse. There’s a lot of pressure on Obama to replace him with someone from the world of business. It’s not clear how well business experience translates into the world of politics and policy, and it’s also not clear that American business has been running itself all that well, but that’s the conventional wisdom. Obama, you see, being a Kenyan anti-colonialist and socialist, has been hostile to business. We know this is true—despite bailing out the banking sector, saving GM, and sparing the insurance industry in its health care reform—because he once called bankers “fat cats.” They’ve never recovered from this grievous insult: the monied are so sensitive. Years ago, an old friend of mine said that the rich don’t merely want not to pay taxes—they want to be paid tribute. I think she was onto something.
The U.S. economy continues its noble attempt to find its feet, with mixed success. In the “no kidding” department, the Business Cycle Dating Committee of the National Bureau of Economic Research—a panel of eight economists who are the official arbiters of recession and recovery for the U.S. economy—declared on September 20 that the Great Recession ended in June. Not June 2010, but June 2009. This may surprise a civilian audience in at least two ways. First, what took them so long? The answer is that they really really want to be sure, and a 15 month delay is actually about average. And second, the news that the recession is over may strike some people as strange. There were over 300,000 fewer jobs last month than when the recession officially ended in June 2009, the unemployment rate is a tenth of a point higher, and the share of the adult population with a job is off by almost a full percentage point. (The unemployment rate would be a lot higher if people hadn’t dropped out of the labor force.)
But, you know, GDP. Real GDP, that is the total value of goods and services produced in the U.S adjusted for inflation, stopped shrinking in the middle of last year and is up a miserable 1.7% since then. And since, to a bourgeois economist, the economy is about money and not people, the recession is over. Doesn’t that make you feel better.
Speaking of miserable, the housing market, which led us into this mess, isn’t showing much leadership in getting us out of it. July’s housing figures were uniformly awful. August’s, which we’re just now getting, are coming in a little better. As Economy.com’s Dismal Scientist service put it on Thursday morning, “August sales of existing homes recovered somewhat from the July free fall, but this gain only brings the pace of sales up to the high end of miserable.” But applications for new mortgages have been down for the last several weeks, and the Federal Housing Finance Agency’s price index, released the other day, was off by 0.5%. That’s a July number, though, so maybe that’s just a relic of a really bad month.
But first-time applications for unemployment insurance, filed by people who’ve just lost their jobs, rose 12,000 last week following two weeks of decline. Right now, this number seems trendless, up one week and down the next, but stuck at a high level. The job market is off life support, but it’s not bounding out of bed and ready to run a half-marathon, either.
And the Federal Open Market Committee, the group within the Federal Reserve that sets monetary policy, met earlier in the week and decided to keep the spigots wide open. They’re still concerned that the recovery is weak. Further, their statement expressed discreet worry that the economy was in danger of sinking into deflation, a period of falling prices and shrinking activity that almost no one but the most extreme sadomonetarist would enjoy.
Zuckerberg, Christie, & Booker
Ok, enough business cycle news. On to something of longer-term interest. We’ll hear later in this show from Gary Shteyngart, whose excellent dystopian novel Super Sad True Love Story depicts an American future of corporatized, wired illiteracy. By one of those freakish bits of coincidence that would be unbelievable in fiction, I just read in The New York Times (which I still get delivered every morning, in its dead-tree format) that Mark Zuckerberg, one of the founders of Facebook (of which I am, I must disclose, an avid user) is planning to give $100 million to the public schools of Newark, New Jersey.
Parenthetically, I’m not sure how Zuckerberg can actually put his hands on $100 million. He’s supposedly worth, in the monetary sense, something like $7 billion. Facebook is wildly successful, of course; something like one in every 12 earthlings has an account (no exaggeration). But the valuation of Facbook is mostly on paper. It’s not making oodles of money right now, and I don’t get how Zuckerberg is a centimillionaire in any money more tangible than that of the mind. But, hey, in the world of Web 2.0—or is it 3.0 now? I keep losing count—you gotta dream.
Let’s leave all that aside. So Zuckerberg, who grew up in Westchester, now lives in California, and has absolutely nothing to do with Newark, wants to give $100 million to the schools in a desperately poor city whose schools could use every penny they can get their hands on. The city’s school system has spent 15 years in a kind of receivership, under state and not local control. So Zuckerberg has now made a deal with New Jersey governor Chris Christie to turn some control of the schools back to the city and its mayor, Cory Booker. Christie is a budget-cutting Republican, and Booker a sleek corporate new Democrat, but both are in love with what’s euphemized as education “reform,” which means privatization, competition, charter schools, and lots of testing. Curiously, corporate America also loves this agenda—and so does the Obama administration.
And where will these three men, Christie, Booker, and Zuckerberg, make the official announcement? On the Oprah Winfrey show. As I say at the beginning of my interview with Shteyngart, this country is almost impossible to satirize, since it does so much of the satirical work on its own.
Of course, it’s important to point out that the so-called school reform agenda doesn’t work. Some charter schools are very good, and some are awful, but the evidence is that they have little effect on educational outcomes. The problems of a school system like Newark’s are that the city is full of poor people leading very hard lives. Even a $100 million gift won’t change that. Neither will Web 9.0, if we get there.
So why does Corporate America love charter schools so much? Partly it’s ideological—the rhetoric of choice and competition appeals to their businessy minds. But they’re also a way to break teachers’ unions and cut salaries. So even if charters and the rest of the debased agenda, like frequent testing, make no educational sense, they can give us the same depressing outcome at half the price.
The school reform movement took some serious hits in last week’s elections. In New York, the three candidates most prominently associated with it—who were showered with cash from Wall Street—all lost badly. And Washington’s current mayor, Adrian Fenty, also lost to a primary challenger. There were other local issues at stake—notably the perception by the city’s black voters that Fenty, a Booker- and Obama-style New Democrat, wasn’t doing much for them—but his aggressive school reform agenda was an important part of the mix. His schools chief, Michelle Rhee, is reportedly a favorite to run New Jersey’s schools. When corporate America loves something, it doesn’t matter that it lacks any empirical or popular support.