It’s endemic to English majors. You know you were born too late. You were supposed to have been hanging around Paris in the twenties, nodding politely to Ernest Hemingway, F. Scott Fitzgerald, Ezra Pound, Sherwood Anderson, John Dos Passos, John Steinbeck – or even Cole Porter – as you pass them on the street. Maybe you’d even chat with one of them, these expatriate American writers – but not that surly madman Ezra Pound. He was the Ty Cobb of that literary scene – great talent, everybody hated his guts.
But that wouldn’t matter. You’d soon enough retire to your unheated garret and knock out another chapter of the Great American Novel. Or like Hemingway, you’d write at the table of the local café – perhaps a clean, well-lighted place – nursing one cup of bad coffee all afternoon. It’s all very romantic. Damn, you were meant to be young, devastatingly insightful and down-and-out in Paris, where it’s always raining, in those few years, inventing the modern world with these guys.
That was the time and the place. Josephine Baker and Sidney Bechet were in town. Sylvia Beach was chatting with James Joyce over at her bookstore, about publishing Ulysses for him, and so on. It was A Moveable Feast. Of course you’d probably cross paths with that odd Gertrude Stein and her even odder partner, Alice B. Toklas – but that would be okay. She was the one who named the local crew. They were The Lost Generation.
Stein is said to have heard her French garage owner speak of his young auto mechanics, who couldn’t do anything right, as “une generation perdue” – and that struck her as about right. It had been that war – France lost a generation of men, for no good reason, as the war gained no one much of anything, and what all of her crowd was writing about was disillusionment and the pointlessness of what followed the war, and about being brave in the face of a world with no meaning. Read Hemingway’s The Sun Also Rises – Jake Barnes gets it. And oddly, Hemingway says Gertrude Stein didn’t get it – “I thought of Miss Stein and Sherwood Anderson and egotism and mental laziness versus discipline and I thought ‘who is calling who a lost generation?'” Things may be awful and meaningless, or awfully meaningless, but there is self-discipline and self-control. Do the honorable thing and write dead honest perfectly lucid prose, damn it. That’s all we have left.
Ah, those were the days. And then it all fell apart. Hemingway blew his brains out in Idaho and F. Scott Fitzgerald spent his last year just down the street here on North Laurel Avenue in Hollywood, waiting for the final heart attack, which came soon enough. It was over.
But the disillusionment and pointlessness of what followed the war, and the notion of being brave in the face of a world with no meaning, stuck around, as did the whole concept of a Lost Generation. Anytime you lose a decade or more, when what everyone thought was progress turns to dust, where you find yourself right back where you started in spite of it all, is a lost generation. It’s a useful term.
People use the term now for existentially absurd economic conditions, as in Japan’s Lost Generation:
There’s an entire generation of people in their late 20s and early 30s who came of age during Japan’s so-called lost decade, a stretch of economic stagnation that started to ease in 2003. Through that period, with Japanese companies in retrenchment mode, young people faced what came to be known as a “hiring ice age.” Many settled for odd jobs or part-time work to make ends meet but hoped eventually to find their way into regular employment with the stars of corporate Japan. Instead, they’re being passed over in favor of new graduates – a serious problem in a country that still values lifetime employment and frowns on midcareer job-hopping.
This group is called the “lost” or “suffering” generation. Some 3.3 million Japanese aged 25 to 34 work as temps or contract employees – up from 1.5 million 10 years ago, according to the Ministry of Internal Affairs. These young people have earned various less-than-desirable classifications in hierarchy-conscious Japan. They might be keiyakushain, or contract workers, typically lower-paid than full-time staff, with fewer benefits and minimal job security. Or they’re hakenshain (people employed by temp agencies); freeters (those who flit from one menial job to the next); or, at the bottom, NEETS (an acronym coined in Britain that stands for not employed, in education, or in training).
The plight of such folks was the subject of a recent TV drama called Haken no Hinkaku, or Dignity of the Agency Worker, the saga of a twenty-something temp who must put up with the snobbery of full-time colleagues despite her long list of qualifications.
Why does that sound familiar? Maybe we’ll have our own Lost Generation here too. Who needs Paris?
And of course, the roots of what happened in Japan also sound familiar:
Briefly, a combination of incredibly high land values and incredibly low interest rates led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.
That sounds familiar, but our guys didn’t do that dumb thing the Japanese did:
Recognizing that this bubble was unsustainable (resting, as it did, on unrealizable land values – the loans were ultimately secured on land holdings), the Finance Ministry sharply raised interest rates. This popped the bubble in spectacular fashion, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the huge debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks having to be bailed out by the government.
Ah, that led to a bad place:
Eventually, many become unsustainable, and a wave of consolidation took place (there are now only four national banks in Japan). Critically for the long-term economic situation, it meant many Japanese firms were lumbered with massive debts, affecting their ability for capital investment. It also meant credit became very difficult to obtain, due to the beleaguered situation of the banks; even now the official interest rate is at 0% and have been for several years, and despite this credit is still difficult to obtain.
That too sounds familiar, even if we didn’t make the Japanese mistake:
Overall, this has led to the phenomenon known as the “lost decade”; economic expansion came to a total halt in Japan during the 1990s. The impact on everyday life has been rather muted, however. Unemployment runs reasonably high, but not at crisis levels (the official figure is a little under 5%, but this is a considerable underestimate – the real level is probably around twice that). This has combined with the traditional Japanese emphasis on frugality and saving (saving money is a cultural habit in Japan) to produce a quite limited impact on the average Japanese family, which continues much as it did in the period of the miracle.
Hey, we’re turning Japanese – saving what we can and making do. And with consumers unwilling to spend much, we’re heading for a lost generation. Everyone sits at home, quietly.
But things are more dynamic than that. Things are not flat, they’re spiraling down:
In Arizona, the budget has grown so gloomy that lawmakers are considering mortgaging Capitol buildings. In Michigan, state officials dealing with the nation’s highest unemployment rate are slashing spending on schools and health care.
Drastic financial remedies are no longer limited to California, where a historic budget crisis earlier this year grew so bad that state agencies issued IOUs to pay bills.
A study released Wednesday warned that at least nine other big states are also barreling toward economic disaster, raising the likelihood of higher taxes, more government layoffs and deep cuts in services.
That’s all based on a report by the Pew Center – Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are “at grave risk.” Wisconsin officials disputed the findings. But the “double-digit budget gaps, rising unemployment, high foreclosure rates and built-in budget constraints” are real enough. We may not have had the Great War knock the stuffing out of us, turning us into brave and stoic cynics writing great prose, but this will do.
Of course not everyone is hurting. The New York Times drills down deep into the unemployment data and produces this snazzy interactive graphic – some people will keep their jobs, as their particular demographic group is in a profession, or trade, or service, that is okay at the moment. They won’t feel lost.
But at Free Exchange there’s this comment:
It is worth thinking about the fact that probably 90% or more of the people who make economic policy, write about economic policy, and produce journalism on economic policy fall into demographic groups in which the unemployment rate – during perhaps the worst recession since the Great Depression – is comfortably below 5%.
That’s something to keep in mind when you read that things aren’t that bad, or, maybe they are, sort of, but they can be fixed. The happily employed are telling you that. As Hemingway once said, “What every good writer needs is a foolproof, shockproof crap detector.” The Lost Generation knew a thing or two.
And James Pethokoukis reads what economist David Rosenberg, formerly of Merrill Lynch, thinks about what’s really going on and distills Rosenberg in 12 Reasons Unemployment Is Going To (At Least) 12 Percent, It’s not cheery:
Optimists, Rosenberg explains, underestimate the incredible damage done to the labor market during this downturn. And even before this downturn, the economy was not generating jobs in huge numbers. If he is right, all political bets are off. I think the Democrats could lose the House and effective control of the Senate. I think you would also be talking about the rise of third party and perhaps a challenger to Obama in 2012.
Well, maybe, but his twelve reasons that things will get worse are eye-opening.
For the first time in at least six decades, private sector employment is negative on a 10-year basis (first turned negative in August). Hence, the changes are not merely cyclical or short-term in nature. Many of the jobs created between the 2001 and 2008 recessions were related either directly or indirectly to the parabolic extension of credit.
There are now a record 9.3 million Americans working part-time because they have no choice. In past recessions, that number rarely got much above six million.
The workweek was sliced this cycle from 33.8 hours to a record low 33.0 hours – the labor input equivalent is another 2.4 million jobs lost. So when you count in hours, it’s as if we lost over 10 million jobs this cycle.
The other nine reasons are just as disturbing.
But we may not have to worry about the upcoming lost generation, really, as Newsweek’s Daniel Gross says we’ve already sort of have had our decade of running in place, which he calls The Lost Decade. Japan may have had their decade with its “shrunken and sapped of confidence, with very little to show for a large amount of government spending and near-zero interest rates” – but if you think about it, so did we:
Let’s start with the single most important economic number: jobs. Over the past 10 years, job creation has been extraordinarily weak. In September, on a seasonally adjusted basis, there were 108.5 million private (nongovernment) payroll jobs in the United States – almost precisely the number there were in June 1999. … In the past decade, in other words, the private sector hasn’t created a single job. That’s awful, especially when you consider that the population grew 9 percent during those years, from 282 million in 2000 to 308 million today.
And the stock market went nowhere at all:
As this depressing 10-year chart of the S&P 500 shows, stocks went precisely nowhere in the past decade, despite all the efforts to help the market, from slashing capital gains and dividend taxes to keeping interest rates extremely low to bailing out just about everyone.
And now, Americans seem to have lost their interest in investing. He runs the numbers. Between 1992 and 2000, the percentage of households owning mutual funds doubled – everyone jumped in. And then they got out, so we’re back where we started:
George W. Bush made the “Ownership Society” a theme of his presidency, suggesting that investing in securities could be the solution to everything from Social Security’s long-term insolvency to the health care crisis. But Americans largely ignored these calls. According to the securities industry’s Equity Ownership in America 2008 report, the proportion of the population that owned stocks or bonds fell from 57 percent in 2001 to 48 percent in 2008. And in 2008, 45 percent of U.S. households owned stocks – inside retirement programs and in brokerage accounts – down from 49 percent in 1998.
Actually, no one had the money to play the market:
Incomes were basically stagnant during the decade while the costs of vital goods and services – education, health insurance, energy – spiked. The latest report from the Census Bureau on income, poverty, and health insurance is full of interesting data that show that median household income in 2008, at $50,303, was below where it was in 1998. The same report shows … that both the number and the percentage of people living below the poverty line rose, from 11.9 percent in 1999 to 13.2 percent in 2009.
And there are reasons for all this:
Many factors explain the sluggish performance. Globalization, the continuing information technology revolution, and the off-shoring of manufacturing and service jobs kept employment in check. But at root, it turned out that the policies enacted by the folks running the system – low interest rates, cutting taxes aggressively, disempowering unions, empowering Wall Street, deregulating the financial system – just didn’t work as advertised. Meanwhile, policymakers neglected some important areas that can help support financial stability – such as health insurance.
So don’t expect dead times ahead and a new Lost Generation writing great prose. We’ve been dead in the water for ten years, but of course pretended we weren’t. Homeownership rates spiked up, as everyone knew we were in wonderful times, then fell back to where they were:
Once the housing market peaked in the summer of 2006 and foreclosures started to mount, the homeownership rate declined. Today, it stands at 67.6 percent – almost precisely where it was in the fall of 2000.
But now the stock market is up again, for no particular reason, as investors gamble on the vague hope something will change, or position themselves defensively on the off chance they may, which would get them in early. That’s a high-risk bet. But risk is what they do.
Of course it all has its ironies, as in this breaking news:
It was the sale of the season. When a seminal Warhol – one of the artist’s first silk-screen paintings – came on the block at Sotheby’s auction of contemporary art on Wednesday night, the auctioneer, Tobias Meyer, opened bidding at $6 million and was stunned when a bidder instantly doubled it.
The price rose at breakneck speed as five collectors vied for the classic image, “200 One Dollar Bills.” It ended up selling for $43.7 million (including fees to Sotheby’s), more than three times its high estimate of $12 million. The buyer, whom Sotheby’s refused to identify, bid by telephone through Bruno Vinciguerra, the company’s chief operating officer. Sotheby’s would also not identify the seller, although people familiar with the collection said it was Pauline Karpidas, a London-based collector.
That’s funny – we may be a lost generation, in the middle of a lost decade, or two, but the rich are spending obscene amounts of money to buy ironic pictures of money. It’s like a scene from Fitzgerald’s Great Gatsby. Yes, the Lost Generation knew a thing or two. Who needs Paris?