Make no mistake, what happens on Wall Street affects Main Street—and in more ways than you might realize.
First, there are the job losses. The New York Times reports that the crisis in the financial services sector has led to the largest one-month spike in New York City unemployment in more than 30 years.
Unfortunately, what happens in New York doesn’t stay in New York.
Financial troubles of this magnitude affect New York State, the East Coast, the country, and the world from the standpoints of employment and business management.
As credit tightens, companies have less access to money, which means projects and expansion plans get put on hold. Slower growth, in turn, means fewer new jobs.
And that’s only the business impact. Wall Street’s woes also affect individuals—a lot of individuals.
By best estimates, more than 60 percent of Americans now own stock, compared with 20 percent as recently as 1980.
Even if you haven’t invested directly in the stock market, if you have a pension plan, 401(k), or other long-term savings vehicle through your employer, it’s likely tied to equities.
What if you have none of these?
If you have insurance of any kind (homeowner’s, automobile, health or other), the fate of large insurers like AIG is your problem.
In addition, your city or town’s services and your local school system are connected to the bigger financial picture.
Finally, any credit cards you own may be subject to change. The New York Times gives one example: American Express is reducing the maximum credit limit for half of its tens of millions of cardholders.
The situation certainly merits concern. Nevertheless, it’s important to avoid equating it to the Great Depression, as some government officials and members of the media have done.
To put things in perspective, consider a few facts about the Depression, courtesy of PBS.
The Great Depression lasted approximately 10 years, and over the course of those years, unemployment averaged 18 percent. This means nearly one in every five people was unemployed. At its peak, in 1933, the unemployment rate hit 25 percent, and one in four Americans was out of work.
If you haven’t heard stories about the Depression from your parents, grandparents or great grandparents, pause and try to fathom how widespread the situation was.
Then consider this summary from Ben Wattenberg PBS host and essayist: “The Depression hit almost every sector of the economy. One-third of American farmers lost their land from 1929 to 1932. Housing starts plunged by almost 90 percent between 1929 and 1933, and they wouldn’t rebound for almost 15 years. The Dow Jones Industrial Average also plunged by almost 90 percent. Total wages dropped 60 percent. As we now measure it, more than half of all Americans were living in poverty.”
When put in this context, as bad as things are, they could obviously be a lot worse.
It’s worth recognizing, though, that some of the same things that caused the Great Depression have caused today’s turmoil: namely, availability of cheap credit and heavy debt.
Thankfully, government intervention aims to stave off Depression the Sequel, as it has been called. But there’s no such thing as a free ride. Government involvement raises other concerns, including the national debt and how hundreds of billions of dollars will ultimately impact the country and its citizens.
We’re mired in it now, and so must dig our way out. Still, the entire situation certainly begs the question: Why haven’t government and industry leaders, who are supposedly the nation’s best and brightest, learned from history?
Although the words have nothing to do with economic conditions, lyrics from Elvis Costello’s song “Beyond Belief,” which can be found on the “Imperial Bedroom” album, have been running through my head this past week: “History repeats the old conceits/The glib replies the same defeats.”
Yes indeed. But here’s the thing: It doesn’t have to be this way. In this country, the people have a voice.
What message do you want heard? My personal message, to paraphrase one of the presidential candidates, is enough already. Enough.
Paula Santonocito
Career Editor, SingleMindedWomen.com