The Fraud Nightmare Becomes Reality

Al Franken, before he loosed his inner policy wonk and became a senator, used to mock the self-esteem movement – see Daily Affirmations by Stuart Smalley – “I’m good enough. I’m smart enough. And doggone it, people like me!”

Yeah, right – the conceit was a hoot. Stuart Smalley, the character Franken invented, was hopeful and earnest and positive, and a hopelessly unaware doofus – clearly not good enough and certainly not smart enough, and his assumption that people liked him was obviously wishful thinking – and both sad and funny. But Stuart Smalley dutifully made those affirmations, as we were told we all should. But the self-esteem movement was absurd – high self-esteem couldn’t make a short teenager with slow reflexes into an NBA star, or a tone-deaf kid from Cincinnati into an opera diva. And it couldn’t make Stuart Smalley into George Clooney or whatever.

But comics mock self-delusion. That’s what they do. And Franken’s routine was the pop-psychology version of Andy Kaufman singing the Mighty Mouse Song – “Here I come to save the day!” That might have been a stinging critique of neoconservatism and the Project for the New American Century – and it would have been cool if every time Bill Kristol popped up on Fox News and told us we obviously had to invade another nation, take it over and occupy it for a few decades, someone had rolled the Andy Kaufman tape. Here I come to save the day, indeed. But the timing was all off – Kaufman was long gone before William Kristol sang the Mighty Mouse Song on Fox News night after night.

But there was nothing new in all of this. By 1969, the Power of Positive Thinking – the feel-good-about-yourself book from 1952 – had morphed into the psychologist Nathaniel Brandon publishing his highly acclaimed paper – The Psychology of Self-Esteem. There was real science here, and research, showing that “feelings of self-esteem were the key to success in life.” This could be quantified, and his thought soon became the hot new thing in education – at one point California’s legislature even established a self-esteem task force for the state’s schools – the California State Task Force to Promote Self-Esteem and Personal and Social Responsibility of all things.

But it didn’t work out. And the self-esteem movement didn’t work out. In the Wall Street Journal, Kay Hymowitz reviewed the fifteen thousand or so studies the movement generated and offered this summary:

And what do they show? That high self-esteem doesn’t improve grades, reduce anti-social behavior, deter alcohol drinking or do much of anything good for kids. In fact, telling kids how smart they are can be counterproductive. Many children who are convinced that they are little geniuses tend not to put much effort into their work. Others are troubled by the latent anxiety of adults who feel it necessary to praise them constantly.

Actually, George Carlin presents that better – it’s all nonsense – “Imagine that. Psychopaths have extremely high self-esteem.”

Actually, everyone else worries that they’re clearly not good enough and certainly not smart enough – and maybe everyone doesn’t much like them at all, if they think about them at all. And except for sociopaths and those with Narcissistic Personality Disorder, and professional football players, and every actor and actress out here in Hollywood, everyone has that fear they never admit to, except maybe when they’re really drunk. Some call it the fraud nightmare – the unshakable idea that someone, or maybe everyone, will suddenly realize that YOU have no idea what you’re doing. Everyone else at work has been humming along, doing what they do and doing it well, and you’ve been faking it. What do you really know? What can you really do? People are going to find that out and laugh at you, and then you’ll be shown the door.

This is pretty common among middle managers – they direct and organize the work of those who are experts at what they do, but it’s been a long time since they did that sort of work themselves and they could hardly do that now, as their skills are now five or ten years behind the curve. They haven’t been in the game for a long time. And on the other side of things all the big decisions are made by those above them – the cool and insightful and clever top executives. A middle manager has no say in anything important, really. So what do middle-managers do and why are they there? It’s probably best to cash the big paycheck and not think about this too much.

And systems folks have the fraud nightmare too – there’s some kid in his twenties in Mumbai, with three PhD’s and willing to work for sixteen hours a day at twenty cents an hour, who could design the software and write and test the code, in twenty minutes – while you chat with your buddies about the Super Bowl in the break room, having just a bit more coffee. And the kid’s code, not yours, would be wonderful. That too is a worry. You worry that someone is going to find out that you sort of have been faking it – you’re not stunningly wonderful at what you do.

This happens a lot in all professions. You know what you should tell yourself. I’m good enough. I’m smart enough. And doggone it, people like me! But you remember Stuart Smalley. You have this sinking feeling that you’d never tell anyone, that you’re a fraud.

And guess what. You may be right.

No really – there’s Tyler Cowen, a professor of economics at George Mason – with his blog Marginal Revolution – and Jayme Lemke, a doctoral fellow there. These two are co-authors of 10 Percent Unemployment Forever – that’s in Foreign Policy magazine of all places. And in the New York Times they offer a taste of that – analysis shows there are a lot of positive but useless folks out there.

The setting is the release of the December jobs report – unemployment officially at 9.4 percent – and over half of those people have been out of work for over six months. Cowen and Lemke point out that this is the highest long-term unemployment rate since World War II – and that’s not counting the twelve million more who would like to be employed in full-time jobs but have either given up looking or can only find part-time work.

But something is odd here:

Yet despite the employment situation, the United States economy continues to recover. Consumer spending is up and investment and corporate profits are doing fine. So how is it possible that by some indications we are currently living in the worst economic conditions since the early 20th century, and by other measures we are living in the most economically productive time in all of history?

But they offer a simple story to explain this:

A business owner is hit hard in 2009 by the recession and for reasons of cash flow and profitability is forced to fire one of her 20 employees. Some time passes, 2010 comes around, and sales are all back to normal. The business owner has learned to make do with the smaller staff. In terms of output per worker, the business is actually more productive than before.

And now we have that writ large:

About one in 20 labor force participants lost their jobs, yet sales are back to normal. The obvious but uncomfortable implication is that many of those workers were not adding much value to their companies in the first place. In other words, there had been many “zero marginal productivity jobs” on the books, propped up by the previous boom and the housing bubble.

Someone was not adding much value to their company? Was that you? Is that you?

And there is this depressing observation:

Once you see many of these jobs as having adding little economic value, it becomes difficult to imagine a quick fix. It is unlikely that just waiting for wages to fall will reemploy these people, nor is additional fiscal stimulus from the government likely to help. The unemployment problem seems daunting.

We’re in trouble. Maybe we do have a nation of frauds. Your work was a joke all along.

But there may be hope:

What will it take to reemploy these individuals? A slow and painful but eventually productive process of reallocating labor resources towards new and more valuable uses needs to take place and indeed it is already partly underway, albeit at a slow pace. High-performing industries are taking in new workers (hospitality and health care each added about 40,000 jobs in December), and just shy of 70 percent of unemployed workers have made or plan to make major career field changes according to a recent Pew Research Center survey.

Maybe there’s something you might be good at, or there’s this:

The economy’s changing composition, if accompanied by robust economic growth, also will help many of the unemployed. A worker who wasn’t worth much sweeping up the back room is suddenly valuable when new orders are flowing in and he is needed to ship the goods out the door. And if all those new orders require keeping the warehouse open late, the company may need to bring in a new night watchman. So a rising tide eventually lifts most boats. At some level of business expansion, a worker who previously didn’t have a productive place can become important.

But that may be a long way off. We will have persistently unemployed workers. And maybe they were useless anyway.

In the Foreign Policy article, Cowen and Lemke add more detail:

The U.S. economy is going through some major structural shifts. It’s not a question of getting back to where we were, but rather that the economy must solve a new problem of re-employing a lot of people who were not, in reality, producing very much in the first place. That’s a steeper challenge than we had realized early in the stages of this recession – and so far policymakers have failed at meeting it.

Analysts still disagree on how rapidly the U.S. economy will recover. But they’re missing the point. The era of low unemployment may be in our rearview mirror for a long time to come. 

But how did this happen? Well, that’s puzzling:

The simple Keynesian explanation for the initial unemployment is that aggregate demand – the country’s combined spending and investment – has been too low. But it’s unlikely that spending is the only problem, as unemployment is too high and too persistent relative to similar episodes of disinflation in recent history. If weak demand was the main problem, profits should be collapsing too, but they are not. Investment and corporate profits have been fine for some time now, and they are broadly within the range of pre-recession estimates.

And this:

There’s a second problem with the Keynesian story, which relies heavily on the notion that real, inflation-adjusted wages are sitting at too high a level. If unemployment causes someone real suffering why wouldn’t he or she be willing to take a lower salary to get a job and ease the pain? But rather than falling, private-industry wages are currently on the rise – up nearly 60 cents per hour since the end of the recession. There are plenty of good theories why it is hard to cut the wages of employed workers – long-term contracts pose legal challenges, and fragile worker morale threatens to collapse under the stress of wage cuts. But it’s harder to explain why unemployed workers can’t find new jobs for less pay, especially if output is recovering, profits are high, and corporations are sitting on a lot of cash.

Maybe there is only enough work for those who aren’t frauds. Or there are other issues:

Many conservatives in the United States have placed the blame for high unemployment on the shoulders of President Barack Obama, arguing that his administration’s liberal agenda has complicated the recovery. But the statistics suggest otherwise. Again, corporate profits and consumer spending are fine. Indeed, it’s the sector in which the government has most directly intervened – health care – that has maintained the most robust job growth over the past two years, adding 20,000 new jobs in November alone. And don’t go blaming job losses on illegal immigrants taking jobs from documented workers: Latino immigrants have left the country in large numbers since the start of the financial crisis.

Okay, the problem is none of those things, but the fraud thing:

As time passes, it is harder to avoid the notion that a lot of those old jobs simply weren’t adding much to the economy. Except for the height of the housing boom – October 2007 through June 2008 – real GDP is now higher than it has been in the entirety of U.S. history. The fact that the United States has pre-crisis levels of output with fewer workers raises doubts as to whether those additional workers were producing very much in the first place. If a business owner fires ten people and a year later output is almost back to normal, it’s pretty hard to make the argument that they were doing much in the first place.

It’s the nightmare come true:

Before the financial crash, there were lots of not-so-useful workers holding not-so-useful jobs. Employers didn’t so much bother to figure out who they were. Demand was high and revenue was booming, so rooting out the less productive workers would have involved a lot of time and trouble – plus it would have involved some morale costs with the more productive workers, who don’t like being measured and spied on. So firms simply let the problem lie.

Then came the 2008 recession, and it was no longer possible to keep so many people on payroll. A lot of businesses were then forced to face the music: Bosses had to make tough calls about who could be let go and who was worth saving. …

In essence, we have seen the rise of a large class of “zero-marginal product workers,” to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves – and arguably bad for society at large – but it simply doesn’t damage profits much. It’s a cold, hard reality, and one that we will have to deal with, one way or another.

That’s cold, and so is this:

It’s not a question of getting back to where we were, but rather that the economy must solve a new problem of re-employing a lot of people who were not, in reality, producing very much in the first place.

And out of work or still employed, we all feel that might be one of us. Sure, make your daily affirmations in the bathroom mirror as you shave in the morning. You ARE good enough. You ARE smart enough. And doggone it, people LIKE you! Keep your self-esteem sky high.

But the economy has moved on. That ten to twenty percept of the population who are now unemployed seem to have been never needed in the first place, and they’re not needed now, nor will they be needed in the future. And anything you try to boost your self-esteem isn’t going to change that.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
This entry was posted in Economic Recovery, Economic Theory, Self-Delusion, Self-Esteem, Unemployment and tagged , , , , , , , , . Bookmark the permalink.

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