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Look on the Bright Side


Illustration by Jason Lee  

In the long run, the crash could effect positive structural changes, says NYU sociologist Dalton Conley. “I actually felt less optimistic during the boom times. I was worried about the long-term fundamentals that are now being straightened out.” In the mid-aughts, consumers spent so much that the country had reached the lowest savings rate since the Great Depression—this during a prosperous stretch. “That signaled to me that things were out of whack,” says Conley. “Now, by force if not by choice, we are rediscovering the old Ben Franklin ideals. Savings, thrift, and investment are a more solid basis than consumer spending.” Today the savings rate is 5.5 percent, a fact that suggests that much of our debt repayment (deleveraging, in economists’ terms) may be done. The current rate, Conley says, “is at the lower end of acceptable,” but that’s not a bad thing either. It indicates we’re not a nation of hoarders (that would threaten to unleash a long-term Japanese-style recession, in which nobody borrows anything at any rate), but neither are we reckless spenders, double-leveraging our houses to buy Hummers and flat-screen TVs. While other fundamentals—like income equality—remain far from solved, the optimistic view is that they are at least part of the national conversation again.

The post-crash national animus toward Wall Street notwithstanding, the 7.8 percent run-up in the S&P 500 since the beginning of 2010 (including a 3.8 percent increase in October, the biggest jump in that month since 2003) isn’t just good news for anyone who invested in the stock market during that time. Wall Street is often a leading indicator, and the market seems to like the future of the U.S. economy.

A major reason the Street has been so bullish is monetary policy. Federal Reserve chairman Ben Bernanke has repeatedly made it clear that he intends to do whatever it takes to help fuel the recovery. By injecting cash into the system and driving down short-term interest rates to record lows (just last week, the Fed announced a plan to buy $600 billion of Treasury bonds over the next seven months), the Fed has made it easier than it’s been at any time in recent history for institutions and individuals to borrow money and jump-start the economy. That process takes time, and the Fed’s measures alone may not be enough to spark a strong and sustained recovery. But there are indications that cheap money is already beginning to have an effect: There were more small-business start-ups in 2009 than in any of the preceding fourteen years, including the 1999–2000 technology boom. And the smart money seems to believe that’s just the start of salubrious Fed-induced phenomena. Hedge-fund king David Tepper made some $7.5 billion in 2009, returning 132 percent for his investors. He told CNBC in September that his recent success is based largely on the Fed’s monetary policy. He said Bernanke’s promises made his decision to increase his investment in equities “easy.”

In spite of the widespread talk of a Chinese or Indian century, the United States still enjoys certain competitive advantages over other countries. Our markets are freer and more open than others. Our population is highly, if imperfectly, educated (American adults ages 18 to 29 are on course to be the most educated in history). Our lead in areas like information technology remains considerable, and nascent industries like biotech and clean energy hold untold promise. And we remain a singularly diverse nation. “Compared with many European countries and basically any Asian country, the U.S. is still embracing what I view as its main longer-term strength,” says former Jimmy Carter speechwriter James Fallows, who wrote a story earlier this year called “How America Can Rise Again” for the Atlantic. “That is, its ability to attract talent from around the world.” Even with all the debate over border fences, and post-9/11 Islamophobia, Fallows says, “we lumber our way toward the right view about this. Year in and year out, we get the graduate students. Many of them stay. They think they have a better chance to realize their ambitions here.”

That our national standard of living has risen so steadily in the past, even through crises and economic problems greater than those we face today, is another reason to be optimistic about our future. “Yes, there is the housing crisis,” says Fallows, “but most people own bigger houses than their predecessors would have a generation ago. Overbuilding is a problem, but it’s a problem of abundance: the generation of people starting their families now—the fact that housing prices are depressed gives them a lifetime opportunity. It allows them to not be saddled with debt in a way they might have been five or six years ago.” That’s not only true for the rich. “In the long term, the lives of the poor are vastly improved,” says Conley. “When you follow the way we calculate the standard of living—real income adjusted for inflation—you find that we have no income growth since 1973. But I think that’s balderdash, because it doesn’t account for new goods coming into the basket of goods.” The proliferation of affordable consumer products, from cars to washers and dryers to cell phones, Conley notes, has made life better for millions of people.


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